Despite everything, suppliers hope Edcon will survive

Edcon, once the biggest fashion retailer in SA, went into business rescue at the end of April. CEO Grant Pattison, in charge for the past 2 years, blamed the lockdown as the final straw in the long slide which began in 2007 when it was acquired by US private equity firm Bain Capital for a - with hindsight - unsustainable R25 billion and delisted from the JSE. It sold off the Legit chain to Retailability in 2017, Edgars Active and High Key chains to Footgear, and its majority share in Celrose (including Eddels) to the IDC, and was the recipient of a bailout - again with hindsight, probably ill-considered - all last year.

In footwear, its buy and its supplier base have both shrunk. When asked for a list of footwear suppliers, a senior Edgars staff member supplied just 9 names. A similar request to the Discount Division, which trades as Jet, wasn't answered, but it, too, wouldn't have been a long list.

All Edgars footwear suppliers and a number of known Jet suppliers were approached for comment, and so far 6 have responded. Skye Distribution declined to comment.:

 

Cape Town, W Cape, SA - Business rescue obviously protects Edcon against its creditors and overcomes the technical onerous consequences of reckless trading when in an insolvent situation.

Clearly this puts the amount which Edcon owes us, in the queue with all the other creditors. Our exposure is huge. That, with COVID impact on top of it, is a staggering blow.

The positive side of business rescue, is that the team tasked with this, sees that the business can be saved and then sets about doing so. This means ongoing business, and the feet normally served by Edgars specifically, continue to be served, even if to a lesser degree.

When Edgars traded badly, it affected our volumes with them significantly.

As the Edgars team got their mojo back over the past year, our numbers with them started recovering. Thus we had plenty on order from Edgars when they were obliged to cancel all orders. We would be very happy to continue business with Edgars under business rescue as it would be very difficult for us to find those feet through other channels. It would also be a shame for all the improvement they had shown, to go to waste.

Edgars survival will play a large role in our chances of recovery from COVID.

 

 

 

Durban, KZN, SA - Caprini Footwear has been a longstanding supplier of private label, synthetic upper women's shoes and sandals to Edgars, although the business "isn't as big as it used to be", MD Sanjay Pattundeen said.

"We're a 30-day account, and fortunately we were paid a significant sum in February," he said. "We still have some amounts owing.

"Under business rescue, they will need to trade and they will need to buy footwear, which would be on a CoD basis. I hope we'll get some of that."

He said it was clear that footwear consumption in SA would fall in 2020, "but we have to hope that the consumption of locally made footwear will fall less than imported footwear".

"If we can offer prices which are more-or-less unchanged, we would have an advantage over importers, who will be more affected by the change in the exchange rate. The most important thing is to preserve jobs."

 

 

 

 

 

Pietermaritzburg, KZN, SA - Eddels has also had a long and very close relationship with Edcon, and was a subsidiary of the retailer until last year. It has been supplying branded leather men's footwear to Edgars and private label synthetic upper women's footwear to Jet.

CEO John Comley declined to comment on the effect on Eddels, but said Edcon had been "a sizeable part of my life", and that as a R21 billion turnover company, its fate would impact on the industry as a whole.

He said the pandemic was "a catharsis for the footwear industry in SA".

"The industry has been in decline for 7 years - not if you count pairs produced, but if you look at the ex-factory value of those pairs. Middle- to upper quality and price manufacturers have had a particularly hard time of it over the last few years, operating at below critical mass, which means they haven't been able to be competitive. So have the component suppliers, who have also been our bankers in a way.

"We will see now the real systemic weaknesses of the industry - not because of Edcon so much, but because of Covid-19. Some people believe that when they get back to work, they'll go back to full order books. The reality is the chains are sitting on massive stocks of imports which they will have to clear first - they've got them, they own them, they can't send them back.

"We've lost Easter, which is a massive trading period, second only to Christmas."

However, he said there was now an opportunity to "push the reset button" by sourcing locally to provide as many jobs as possible.

 

 

 

 

Cape Town, W Cape, SA - We're owed a substantial amount but fortunately we insure our debtors book. Edgars has been a very big customer for us, and we were paid as per our agreed terms, up until the lockdown.

               Our future relationship depends on how the business rescue process works. In the days when it was referred to as 'judicial management', the firm was protected against creditors, and  it could borrow against its assets. I hope this will be similar, and that we will continue doing business with Edgars.

               I have no hard feelings. Edcon was a very successful  company until it was sold off and delisted, and I've been dealing with them for many, many years. I think Edgars chain CEO Mike Elliot has really been doing his best to revive the company,

Unfortunately he has not had the necessary time to turn it around. If he and his executive team are given the opportunity, there is a good chance the company will survive. Everything depends so much on how long it takes for normality to resume, and this is a question no-one has the ability to answer. 

 

 

 

 

Cape Town, W Cape, SA - "We are not a big supplier into Edgars and are thus not materially exposed," wrote Bounty Brands group CEO Stefan Rabe. "Our main business was with Active. We will continue monitoring the situation closely and decide on whether to continue trading once we have a better view on their business rescue process."

 

 

 

I totally get and understand the frankness of replies, given the substantial W20 and S20 commitments reneged on, as well as the amounts owing to each respective company.