Edgars Consolidated Stores Ltd.

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Edgars Consolidated Stores Ltd.

PO Box 100
Crown Mines

South Africa
Telephone: +27 11 495 6000
Fax: +27 11 837 5019
Web site: http://www.edcon.co.za

Public Company
Incorporated: 1929
Employees: 10,766
Sales: ZAR 10.53 billion ($1.87 billion) (2004)
Stock Exchanges: Johannesburg
Ticker Symbol: EDCON
NAIC: 452111 Department Stores (Except Discount Department Stores); 452990 All Other General Merchandise Stores

Edgars Consolidated Stores Ltd. (Edcon) is South Africa's leading retail group. The Johannesburg-based company operates more than 650 stores under a variety of fascia throughout southern Africa, including South Africa, Botswana, Swaziland, Lesotho, and Namibia. Clothing retail is the company's main focus, accounting for some 85 percent of its total revenues of ZAR 10.53 billion (US $1.87 billion) in 2004. The company's Edgars department store chain offers a full range of men's, women's and children's clothing, footwear, and accessories, as well as cosmetics and related department store items at 151 locations. Generally located in shopping malls, the Edgars chain also includes the operation of Red Square cosmetics boutiques and Accessoreyes sunglasses boutiques as stand-alone shops and in-store corner shops. Edcon's other major operation is its United Retail fashion clothing division, which serves as the logistics and administrative arm for the company's Jet Stores, Cuthberts, Sales House, and Legit store formats. Originally operated as independent entities, the United Retail formats also have been bundled into a growing chain of multi-brand shops since the early 2000s. The company also operates the 12-store ABC footwear chain. Together, United Retail and Edgars give Edcon control of nearly one-third of southern Africa's retail clothing market. With future growth in this area limitedin large part because of anti-competition concernsEdcon has begun exploring new retail formats to take it forward into the new century. In 2002, the company acquired general merchandise discount store format Super Mart, which operates at nearly 25 locations. Edcon plans to rebrand the stores as Jet Mart and rapidly expand the chain on a national and regional level. Also in 2002, Edcon acquired CNA, South Africa's leading newsstand and bookstore retailer, with 186 stores, featuring books, magazines, newspapers, stationery, audio visual products, greeting cards, and the like. In 2004, Edcon moved into house-wares and home furnishings with the acquisition of the Boardmans homestore chain, which operates 25 stores in South Africa. American-born Steve Ross holds the company's CEO spot. Edcon trades on the Johannesburg Stock Exchange.

Founding a South Africa Retail Leader in the 1920s

Edgars was founded as a small retail shop on Johannesburg's Joubert Street in 1929just as the world's economy slumped into the Depression era. The Edgars store held on, however, and in 1935 began its long climb to the top of South Africa's retail market. In that year the store moved its premises to Cape Town. The year 1935 also marked the entry of Sydney Press into the company. Press initially joined the store as a part-time worker in order to meet the busy Christmas season. Yet Press, and other members of his family, quickly became the driving force behind the Edgars chain.

Sydney Press took charge of opening a second Edgars store, returning the brand to Johannesburg with a store on Eloff Street in 1937. That year, the company also opened branches in Springs, Benoni, and Germistown. The Edgars extension continued into the end of the decade, with new stores in Durban and on Johannesburg's Field Street, among other locations. Sydney Press's brother Hubert joined the company in the early 1940s, taking charge of various administrative and accounting functions. Another brother, Basil, joined in 1944, taking charge of the group's mail-order business.

Edgars went public in 1946, listing on the Johannesburg stock exchange. The company launched an expansion of its goods offerings, adding men's and boy's clothing to its original women's wear fashions. Through the end of the decade, the company's stores grew to include footwear, fabrics and other household textiles, and jewelry. Edgars also extended its reach to neighboring Zimbabwe, opening its first store there in 1949.

The 1950s marked an era of strong growth for the Edgars chain, and by 1960, the company already boasted nearly 140 stores. The company stepped up its expansion in the new decade, more than doubling its stores by 1965. The mid-1960s marked the launch of an acquisition phase, starting with the purchase of the Sales House brand in 1965. In that year, also, the company picked up U.K.-based Werff Fashion Stores, which operated 26 stores. Edgars' U.K. expansion was short-lived, however, and in 1971 the Werff chain was sold off again.

Diversifying in the 1970s

In the meantime, the company had acquired another strong South Africa store format, Jet Stores, which featured seven supermarkets in 1965. The company later transformed the Jet brand into one of the country's leading fashion retailers, a process begun in the early 1970s with a massive expansionbetween 1971 and 1972 the company opened nearly 80 Jet stores. Part of this stock came from another aborted expansion effort, the acquisition of five Dan Hands furniture stores in 1970. After a rapid expansion, with 35 new stores opened before the end of 1971, the company sold off the brand in 1972.

Instead, Edgars returned its focus to its Edgars chain. In the mid-1970s, the company opened a new generation of "flag-ship" stores, the first of which opened in Parow in 1975. A second flagship opened in Durban the following year. The flagship format continued to grow, and included a 10,000-square-meter store opened on Market Street in Johannesburg in 1976. Serving the company's logistics needs was its new distribution center, opening in Johannesburg that same year. That building was joined by a new corporate headquarters in 1978, in time for the company's 50th anniversary.

By the early 1980s, under Sydney Press, Edgars had grown to a nationally operating business posting sales of more than ZAR 200 million per year. The company attempted a new expansion, acquiring the Ackermans Chain Stores group from Greatermans in 1981. The Ackermans format featured discount clothing and textiles. The extension failed, however, and Ackermans was sold off again in 1984.

In the meantime, Sydney Press, who had guided the company for more than 45 years, lost control of Edgars in 1982. In that year, and reportedly while Press lay in a hospital bed following open-heart surgery, control of the company was taken by South African Breweries (SAB). The event sparked the beginning of a longstanding family feud among the Press family.

Under SAB, however, Edgars flourished. New CEO and managing director Vic Hammond steered the company on its greatest expansion, and by 1990, when Hammond stepped down, the group had established itself as a South African retail empire with sales of nearly ZAR 2 billion. Part of that expansion came from the 1983 launch of a third-generation Edgars flagship format.

Restructuring for the New Century

Edgars continued to grow strongly into the first half of the 1990s, more than doubling sales to top ZAR 4.2 billion by 1995. By then, the company's retail network of more than 520 stores covered a total selling space of 643,000 square meters. In addition to the Jet and Edgars formats, the company operated a number of other store brands, including Cuthberts shoe brand, which had pioneered self-service shoe sales in South Africa; the more traditional ABC shoe stores; Sales House; and Smiley's Wearhouse.

Into the second half of the 1990s, the Edgars chain began expanding its store formats. The Edgars chain in particular expanded through the addition of a number of new in-store concept boutiques, including the Red Square cosmetics corner and a sunglasses department, Accessoreyes. Other boutiques tested by the company during the period included a denim corner, The Issue; a sportswear boutique, Starting Block; and Studio Quattro, which sold watches and jewelry. In addition to being developed as in-store corners, the company also launched a number of self-standing boutiques.

Yet Edgars' growth came to a sudden halt in the late 1990s. Despite steadily growing sales totals, the company had become less and less profitable. By 1998, the group's profits dipped by more than 60 percentsparking the group's share price to crash as well. With shares dipping as low as ZAR 14 per sharedown from a peak of ZAR 170 at mid-decadethe company found itself in dire straits. Employee morale was low, sparking a six-week strike by store workers in 1998. Even longtime majority shareholder SAB jumped ship, unbundling its shares in the company.

In desperation, the company went on a worldwide headhunting effort, bringing in the United States' Steve Ross, formerly with Sears Roebuck, as group CEO. Under Ross, Edgars was renamed Edgars Consolidated Stores Ltd. and listed on the Johannesburg Stock Exchange, becoming known as Edcon. Ross then led the company on a drastic restructuring, reducing store sizesby as much as halfand consolidating the company's retail operations into two major components. Edgars remained the company's department store focus, while United Retail, created in 2000, took over as a single logistics and administrative umbrella operation for the company's other retail formats. The company then hired Accenture and Comparex to take over its internal IT operations, putting into place a more flexible and efficient infrastructure. Also as part of its IT effort, the company launched two e-commerce sites, edcon.co.za and edgars.co.za.

Company Perspectives:

The Group's business mission is to create value: by providing our customers with the right products and outstanding personal service; and by providing customers with payment options and financial services to meet their individual lifestyles and financial needs.

The changes made in the company began to take hold in the early 2000s. By 2001, the company's profits were once again gaining strongly. The company's retail operations now spanned almost 430 locations, which, given the group's concept boutique shops, gave the company nearly 725 retail store fascia. By the end of its 2002 year Edcon's sales had topped ZAR 7.4 billion, and the company had consolidated its dominance of the South African retail scene with a market share of some 29 percent.

Yet Edcon recognized that its command of the South African retail clothing market gave it little room to grow in the near and mid-future. Acquisitions of other clothing retailers were likely to raise anti-competition concerns. Instead, the company became determined to expand beyond the clothing sector.

Edcon made its first move in this new direction in 2002, with the acquisition of Super Mart, a general merchandiser. The Super Mart purchase also enabled the company to move into the lower-to middle-income retail brackets. Edcon immediately began plans to expand the chain, reaching 17 stores by 2003, with plans to open four new stores in 2004. The company also planned to rebrand its new general merchandise operations under the new name Jet Mart.

Edcon's new expansion move involved the purchase of most of the CNA newsstand retail chain. Founded in 1896, CNA had grown into a major South African retailer of books, magazines, and newspapers, stationery, and related items, with nearly 200 stores across the country. Yet CNA fell on hard times in the late 1990s, and by 2002 had entered liquidation procedures. Edcon won the bid to take most of the company in November 2002. After integrating CNA into its retail network, including consolidating its logistics and other operations, Edcon acquired a further chunk of the CNA chain, adding 32 more stores from ThisDay Media Stores in November 2003. Under Edcon's control, CNA quickly regained its profitability.

By the end of its 2004 fiscal year, Edcon appeared firmly revitalized, with earnings expanding by as much as 75 percent and sales soaring past ZAR 10 billion. The company continued to seek out new growth opportunities, and in early 2004 the company announced its entry into the housewares and furniture sector with the purchase of Boardmans, a 25-store chain founded in 1982. The company also acknowledged its interest in acquiring new store formats and retail sectors in the near future. Edcon had shaken off its difficulties of the previous decade and now prepared for further growth in the 21st century.

Principal Subsidiaries

Bookwise Pty Ltd.; Cannon Clothing Pty Ltd.; Celrose Clothing Pty Ltd.; Central News Agency (Swaziland) Pty Ltd.; CNA Properties Pty Ltd.; Edcon Sourcing Pty Ltd.; Edgars Stores (Lesotho) Pty Ltd.; Edgars Stores (Namibia) Ltd.; Edgars Stores Ltd. (Zimbabwe); Elixer Marketing Pty Ltd.; Ellesse SA Pty Ltd.; Jet Supermarkets Botswana Pty Ltd.; Laure Fashions Pty Ltd.; Reactor Clothing Pty Ltd.; Shoecorp Shoe Stores Pty Ltd.; Supermart Pty Ltd.; United Retail Ltd.

Principal Competitors

Woolworths Holdings Ltd.; Mr. Price Group Ltd.; Foschini Ltd.; Brandcorp Holdings Ltd.; Galvanising Techniques; Wooltru Ltd.

Key Dates:

The first Edgars department store opens in Johannesburg.
Edgars moves to Cape Town; Sydney Press joins the company as a temporary employee.
Press opens the second Edgars, returning to Cape Town.
Now led by Sydney Press, Edgars goes public with a listing on the Johannesburg Stock Exchange, and begins a period of strong growth.
Edgars tops 135 stores.
Edgars tops 300 stores; Sales House and Jet Supermarkets are acquired.
The company launches the first of the second-generation flagship Edgars stores.
South African Breweries acquires control of Edgars and the company begins major expansion.
Sales near ZAR 2 billion.
The company launches new small-format boutique concepts, including Accessoreyes and Red Square cosmetics.
Steve Ross becomes CEO and leads a restructuring; the company is re-listed on the Johannesburg exchange and changes its name to Edgars Consolidated Stores (Edcon).
Edcon's operations extend beyond clothing and textiles with the acquisitions of Super Mart and CAN.
Edcon acquires Boardmans housewares retail chain.

Further Reading

Claasen, Larry, "Edcon Goes on Buying Spree to Become the Wal-Mart of SA," Business Day, December 24 2003.

"Edcon Goes from Strength to Strength," Sunday Times Business Times, April 5, 2004.

"Edgars Stores Benefits from Extensive Branch Network," Zimbabwe Independent, September 29, 2000.

Silove, Heidi, "Edcon Strategy Has Goal of Sustaining Turnaround," Business Day Management Review, March 23, 2004.

M. L. Cohen