 |
 |
 |
 |
 |
 | ||||
Edgars plans to trade its way out of tro... Rouxcor to put fizz on the board... Laurie Dippenaar is the Businessman of t... Coronation has offshore vie... SAB's control move keeps the market gue... Microsoft forced to take a new directio... African Harvest rakes in profit... Cash gives Bidvest the clout to buy Renn... African Life set to carve itself up tast... Smart clearing of decks ahead of takeout... |
Edgars plans to trade its way out of trouble
New CE Stephen Ross has decided to use growth, not cost-cutting, to turn around the ailing retail giant, writes MARCIA KLEIN
Newly appointed CE Stephen Ross says any turnaround strategy will include a number of elements, but the basic premise is to look for growth. An analyst says Ross "is not planning the turnaround by firing staff and cutting costs, but rather by getting the merchandise right in order to get more sales - this is a growth rather than a cost cutting strategy." Ross agrees. "We are putting ourselves back into trading competition", he says. Last week Edgars shocked the market with a 80% slump in interim earnings to R22.5-million on 5% higher sales of R2.7-billion. In stark contrast, competitor Foschini this week reported an impressive 23.5% rise in attributable earnings to R92.4-million for the same period on 8.5% higher sales of R1.2-billion. This comparison proves just how much of Edgars' problem is internal. Ross says the comparison highlights Edgars' merchandise (he calls it content) problem. "We are out of balance between fashion and core items. The fashion balance is too high."
One of the first things Ross has done since being appointed about six weeks ago is to part company with the MDs of Edgars and of Sales House, and the operations directors of all three major chains. He says he has "replaced them with strong people, and I have assumed control of Edgars". So while no major cost-cutting/retrenchment is on the table at the moment, this does not exclude the possibility that Edgars "may, in the course of time, reinvent ourselves. But this is at least seven months away. This issue is not our population but the wrong content at the wrong doors." Ross says he has many reasons to be bullish, including the credit base of 3.5-million active accounts. The stores are in good shape and in good sites, and there is strong middle management. Ross says the brands - Edgars, Sales House and Jet - are excellent. "The only question mark is ABC and that is because with only 28 doors, it has not reached critical mass." Responding to criticism that he should dispose of one or more chains, he says he cannot see the value in selling off a Jet or a Sales House. "I will lose the real estate, personnel and chunks of my account base and leave open opportunities for competitors." Ross expects some of the "at-once steps" taken to result in a fair improvement at the 1999 interim, and another level of sales and operational benefits at the end of financial 1999. But he warns that even if everything were right by tomorrow, it would take about nine visits by each customer before the cumulative effect of doing things right was felt and Edgars group stores once again became the customers' store of choice.
Ross's job could be compounded by uncertainty about holding company SA Breweries' intentions with regard to its stake. But Ross says the situation "does not worry me at all". An analyst says Ross is quite right in assuming SAB is committed to Edgars. "But if someone came tomorrow with an offer at R80 a share, SAB will probably forget the whole story and take it."
|