Edcon Q2 17A flash note
​ Edcon’s retail sales decreased by 6.8% y/y (LfL: -8.2% y/y) to
ZAR 6.18bn in Q2 17A, mainly driven by an 18.1% y/y decline in credit
sales (35.4% of total sales). This was due to the changes in the credit
affordability regulations. Cash sales (64.6% of total sales) only increased
by 0.8% y/y.
 The group’s gross profit margin contracted by 360bps y/y to 31.8% in Q2
17A, on the back of increased inventory clearance activity through
aggressive discounting (c.ZAR 600m of Edcon’s inventory).
 Edcon’s debt re-financing resulted in its total net debt decreasing by
4.3% y/y to ZAR 25.9bn (Net Debt to LTM Adjusted Ebitda: 14.8x)
allowing its cash financing costs to decrease by ZAR 862m y/y to
ZAR 137m in Q2 17A (Edcon interest cover Q2 17A: -0.64x vs Q2 16A:
0.13x). The transaction with creditors has been approved by the
competition commission and has been referred to the tribunal.
ï‚· All Edcon divisions continued to report negative top-line and LfL growth,
coupled with gross profit margin declines in Q2 17A.
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