Edcon on the verge of collapse
The coronavirus outbreak may be about to claim its biggest corporate victim with clothing retailer Edcon facing sales losses of at least R1.2bn, putting it on the verge of collapse, says a Business Day report.
CEO Grant Pattison told suppliers in a conference call yesterday that it could not pay them after the group lost 45% of its income in the two weeks before the lockdown. He said the group had only enough cash to pay salaries after its flagship Edgars chain and discounter Jet lost R400m in sales since 15 March.
Edcon’s plight demonstrates the cost of the pandemic – and of the actions to slow its spread – for an economy that was already struggling under the weight of an unemployment rate approaching 30% and set to rise further, notes the report.
Only a year ago, Edcon was given a lifeline by its creditors and landlords and a cash injection from the PIC. The latest blow comes just as Edcon was beginning to turn a corner after a R2.7bn bailout from existing lenders, the PIC, the Unemployment Insurance Fund and landlords.
‘This is not a problem such as in the past that just needs to be solved for Edcon,’ Pattison reportedly told Business Day. In the call to suppliers, he said that management would do everything to save the company. ‘Management are currently focused on implementing the lockdown, but once this is behind us, we will next week turn our attention to building a reopening plan. ‘I am not sure what this looks like or even if it’s possible.' ‘We will be heavily dependent on business support packages offered by government and other agencies and funders,’ said Pattison.
Everything was happening so fast that the government also needed ‘breathing room’ to work out how to kick-start the economy when the lockdown ended. Pattison, who has spent three years as non-executive director and then CEO at Edcon, is in the middle of a turnaround of one of the biggest employers in SA with about 18,000 workers. He reduced rental payments in exchange for a stake in the company for landlords, closed 150 money-losing stores and sold chains such as Legit and CNA. ‘The coronavirus stopped us in our tracks,’ he told Business Day. His company would work closely with the government and funders in seeking a way for it to continue trading. ‘We are not giving up,’ Pattison said.
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