In the space of a week, Edcon CEO Grant Pattison has overseen the acquisition of the Edcon Store Card debtors book by consumer finance business RCS (previously it was owned and managed by Absa), the return of the group’s customer call centre, which had been outsourced to Accenture; and the sale of stationery business CNA to a consortium that includes investment firm Astoria and a management team led by Benjamin Trisk, former CEO of Exclusive Books.
It was a busy week and follows an even busier 2019.
In May 2019, Pattison successfully oversaw the R2.7-billion refinancing of Edcon’s debt, a process that resulted in the exit of previous shareholder Bain Capital and the entrance of new shareholders, including the PIC (through its client the Unemployment Insurance Fund), participating landlords, lenders and Edcon staff.
Prior to 2019, the group consolidated Jet Mart (white goods) into Jet, Red Square cosmetics into Edgars Beauty, and Boardmans into Edgars Home. Edgars Zimbabwe, Edgars Active and La Senza lingerie stores were sold.
The streamlined business now consists of three divisions, Edgars, Jet and Thank U (a digital business incorporating credit, financial services, loyalty and other digital offerings).
This week’s transactions complete Pattison’s tickbox list and he has allowed himself a tiny bit of satisfaction.
“The disposal of non-core assets was top of the list of things to do when we approved the business plan in November 2018. I called it the big shrink. So yes, I do feel just a little bit satisfied.”
But this serenity will be short-lived because the pressure is on. “I have a new list, and the next financial year, which begins on April 1st 2020, is a make-or-break year for the group.”
Edgars is now a leaner operation, with a simpler structure, a third less space (one million m² vs 1.5 million m²), a smaller headcount – with limited forced retrenchment – and no debt.
The urgency is now to grow sales before the available funds run dry.
Managing credit and customer loyalty are central to the drive to improve sales, which is why the sale of the book to RCS and the insourcing of the call centre were critical.
It is a mild understatement to say that the sale of the Edgars debtors book to Absa in 2012 was a disaster – Edgars’ credit base was decimated as a result of misaligned lending policies.
To add to the group’s woes, staff manning the outsourced call centre were not empowered to solve customer problems and complaints.
“We had Absa making credit decisions and Accenture making customer decisions,” Pattison says.
In future RCS will operate as a specialised financial service provider while Edgars will manage its customer relationships and solve its problems.
“The business is now very clean, is operating well and losses are down,” Pattison says.
The problem is growing sales. And for this, he has an A-team.
Pattison says he is good at executing a plan, but knows nothing about fashion. “That is why I hired Shane [van Niekerk, CE Jet] and Mike [Elliot, CE Edgars]. They will fix fashion and customer focus. They have hired a team of strong buyers and merchants and we should start seeing their impact on the stores.”
The customer loyalty programme, once a stellar offering, has been diluted with splinter brands like Edgars Thanku and Thanku loyalty which have confused customers. These will also be streamlined and relaunched for Edgars and Jet customers, together with a new credit offering.
Pattison is focused on the path ahead and spares little emotion for the sale of the iconic, but slightly dusty CNA brand.“It is now quite neat and tidy, but we don’t have the time or money to fix it. The new owners can focus all day on 167 stores – they will take it the final stretch.”
His focus is on getting back onto the path to profitability so that everyone who talks about Edcon can remove the prefix “embattled” from its name.
But, he adds, “the odds are stacked against us”. BM
Sheep wool never sheds.