Edcon: Landlords grudgingly cough up as chain cuts space
Becoming shareholders in the retailer might not be what they signed up for, but the alternatives are worse
Troubled clothing retailer Edcon is making some progress in turning itself around.
Since Grant Pattison became CEO in February 2018, the group has closed a 100 of its smaller stores, reducing its overall retail space by 7%.
Pattison said the plan was to reduce its retail space by 7% to 8% a year over the next two years. The group wanted to do this in a way that gave its landlords enough time to find new occupants, and not to leave stores standing empty for too long a period.
He said an example of this approach could be seen in the redevelopment of its store in the Johannesburg city centre. The refurbishment of its Edgars store would see it occupying one instead of three floors. The remaining space would then be taken up by a yet to be named grocery retailer, several standalone stores and a gym.
SA Corporate Real Estate, Edcon’s landlord, would foot the R184m bill for the refurbishment of the building, and Edcon’s employees at this store would be moved to other outlets while the 14 month long revamp takes place.
The difficulty at the retailer resulted in it sending a letter in December to its landlords, which held 41% of its 1,350 stores, asking them to take a 5% holding in the group in exchange for a two-year “rent holiday”.
Pattison rightly describes its landlords as “reluctant investors”. Becoming shareholders in the retailer might not be what they signed up for, but given the alternative of having an empty storefront, it is a painfully easy one.