Edcon plans hiring spree to boost recovery after Bain exit

Johannesburg - Edcon Holdings plans to increase its workforce by almost 7% and slash prices as South Africa’s largest clothing retailer kick-starts a recovery plan following the exit of US private equity firm Bain Capital Partners.

READ: Bain Capital to sell Edcon in debt-to-equity deal

The owner of the Edgars and Jet chains is seeking to lure customers back to its stores with more than 2 000 new staff specifically trained in the clothing ranges in their departments, chief executive officer Bernie Brookes said in an interview on Wednesday. The move will help to undo the impact of job cuts made by Johannesburg-based Edcon as it struggled under a debt burden caused by Bain’s R25bn purchase in 2007.

“We must be the only value-added department store in the world where you self serve shoes, when what you really want is somebody to come and try them, fit them, make sure they are the right size,” Brookes said in an interview at Bloomberg’s Johannesburg office on Wednesday.

“I expect by the time we finish we will end up putting 2 500 people back into the stores to provide good customer service.”

About a fifth of those may come from stores Edcon is closing, he said, while the rest will be hired.

Plan to 'stop the rot'

The CEO is embarking on a four-year turnaround plan after Bain handed ownership of Edcon to creditors including Franklin Templeton of the US in a debt-for-equity swap, reducing the debt burden to R6bn from R26.7bn. The 87-year-old retailer, which employs about 30 000 people outside peak season, has seen sales decline in its more than 1 500 stores while managing the business largely to make debt repayments, Brookes said.

READ: Edcon faces uphill battle amid Bain exit

Edcon plans to “stop the rot” in its first year under the ownership of creditors, cease losing market share in the second and start to claw it back in years three and four, the CEO said. The retailer plans to sell shares on the JSE when the business is in better shape, he said.

The company will also cut prices and accept a lower profit margin on clothing to increase sales and compete in a market toughened by the entry of international brands such as H&M and Inditex SA-owned Zara, Brookes said. The CEO joined Edcon a year ago, after previously running Melbourne-based department store Myer Holdings.

South African consumer confidence has been hurt by an unemployment rate of 27% while economic growth is expected to slow to 0.1% this year, according to the International Monetary Fund. Retail sales grew at the slowest pace in more than two years in July, and Edcon reported an 8.1% drop in first-quarter retail sales to R6bn.

“When I looked at this business, as complex as it was, I thought I could make a difference here,” Brookes said. “We know we’ve got a plan that will work and we can turn this business around.”