Edcon plans to slash jobs at its head office to reduce costs, the retailer said yesterday, as the debt-burdened company tries to save money to repay bondholders.
A source familiar with the matter said the job cuts would also target Edcon's budget-friendly clothing unit Jet and CNA, its stationery, books and electronics division.
Concerns are growing about Edcon's ability to repay bondholders after Morgan Stanley published a note in September supporting a short position of the company's debt, saying the company's capital structure was "unsustainable".
Once must-haves in fund managers' portfolios thanks to credit-fuelled spending in recent years, South African retailers have been struggling to grow sales over the past 12 months as credit providers pull back due to rising defaults.
"This process may result in a reduction of head count within Edcon's head office.
"We cannot confirm numbers as yet," the company said.
Speaking on condition of anonymity, the source said: "The restructuring will also be at Jet and CNA, meaning there would be job losses there, as well as at head office level."
Company officials declined to comment on whether there would be job cuts at Jet and CNA.
After Morgan Stanley's note, Edcon's $482-million bond due in 2019 plummeted to just 47c, meaning the bonds were worth less than half of their face value.
The bond has since slumped further, however, bid at just 32c in the secondary market yesterday morning, according to Tradeweb.
Rating agencies Moody's and Standard & Poor's cut Edcon's debt further into junk territory, citing poor outlook for consumer spending in South Africa.
Edcon is trying to find a lender to secure credit for shoppers who do not meet the criteria of primary provider, Absa.
In November last year the company reported a loss of R1.1-billion in the 26 weeks to September 27, from R1.3-billion a year earlier.
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