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Edcon maintains first-quarter profit

Aug 21 2012 12:42 I-Net Bridge

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Johannesburg - Retailer Edcon said on Thursday it maintained its gross profit in the first quarter (at 0.9%) compared with the same period a year ago‚ but retail sales were behind expectations and costs negatively impacted adjusted EBITDA.

“Trading for the first two months was tough but returned to acceptable levels in June‚” said Jürgen Schreiber‚ CEO of Edcon.

The quarter’s results consisted of two distinct trading periods. Retail sales for the first two months of the quarter decreased 0.6% compared to a 7.8% increase in sales for June as the weather turned colder. The Edgars division has been impacted by the fact that implementation of various strategic and operational initiatives remain at an early stage. Discount division performance on a like-for-like basis remains “fundamentally on track”‚ despite the weakness in the first two months.

The Edgars division grew retail sales by 1.9% for the quarter‚ helped by the conversion of certain Discomstores to Edgars Active. Same-store sales fell by 2.5%. Edgars was negatively impacted by a weaker first part of the quarter with like-for-like sales decreasing 4.9% in April and May but increasing 1.7% in June. Aggressive markdown activity in the latter part of the quarter decreased gross profit from 42.5% in the prior comparative period to 41.1%.

Same-store retail sales in the discount division increased 5.1% for the quarter‚ with only a 1.4% gain in April and May before a 14% increase in June. Discount division experienced market share gains in several important categories and reported improvements in clothing margins‚ pushing gross profit margins up to 34.0% in the quarter‚ up from 33.2% a year earlier. Retail sales increased 1.9% in CNA‚ increasing gross margins to 33.9% from 33.2% in the first quarter 2012.

Credit and financial services operating profit (reflected in continued and discontinued operations) increased by R18m‚ or 9.3%‚ to R212m pre tax in the first quarter 2013 following higher profits from the insurance joint ventures.

The company said its agreement to sell its private label store card portfolio to Absa for approximately R10bn‚ as well as the establishment of a long-term strategic relationship for the provision of credit to Edcon customers‚ was expected to close before the end of the calendar year.

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