Kids' clothing fills a sweet spot for new-look Edcon

For more than a decade a dark cloud has hung over the prospects of Africa's biggest fashion retailer, Edgars.

31 March 2019 - 07:52 By NTANDO THUKWANA
Children's clothing on display in an Edgars store. Picture: Sebabatso Mosamo
Children's clothing on display in an Edgars store. Picture: Sebabatso Mosamo

For more than a decade a dark cloud has hung over the prospects of Africa's biggest fashion retailer, Edgars, because of suffocating debt levels and sluggish sales that have dogged big-box department stores.

But through the many turnaround strategies that have been touted, one segment of its business has remained resilient - its baby- and children's-wear offering.

Euromonitor International data shows that Edcon, which owns the Edgars and Jet chains, remains the frontrunner in this R26.3bn market segment. The research group forecasts that the sector will attract R27.6bn this year.

Edgars has outperformed rival retailers Woolworths, Mr Price and Pepkor by a long way, claiming 12.5% of market share.

A blend of fashionable and quality apparel has ensured Edgars has a winning formula in its children's-wear category, Edgars CEO Mike Elliott said this week.

"The key to our success is great value for money, [which] I think as a brand we've always offered in kids' wear.

"It's a broad range with a good level of fashionability and quality and a price spot that is kind of in a sweet spot above the value retailers and great value relative to some of the retailers at the higher end of the market," he said.

The retailer, which has been focusing on private labels, has jettisoned about 22 exclusive international brands and now has eight or fewer brands.

Among Edgars' private-label brands - which account for more than 80% of children's wear - the New Wave label has been a dominant offering, especially among teenagers, said Elliott.

International retail players such H&M and Zara may have brought fierce competition in some sectors when they entered the South African market, but they haven't had the right merchandise to shake things up in the children's market.

This is largely the reason Edcon has been able to maintain its position as market leader, said Elliott.

"I think that's more reflective of just how competitive it's been, more in ladies and men's than perhaps there has been in the kids' area," he said.

"You have really strong ladies' and men's retailers come into the marketplace, and less so in kids; and that's probably why we've been able to retain a much better market leadership in kids than other areas."

Euromonitor International said: "It was only in recent years that international players started entering the market with stand-alone stores, diluting sales and taking share from local players.

"Even with the entrance of international players, the changes have been slow in children's wear, as such players only introduced full clothing collections later on, after starting with apparel for adults."

Edgars is moving in the opposite direction to those retailers that are propping up standalone children's-wear stores outside of their parents' big-box formats, such as Cotton On Kids and Truworths' Earthchild.

According to Lester Davids, an analyst at Unum Capital, moving Edgars' beauty and home units into the retailer's bigger stores was a prudent move that is helping reduce rental costs.

Elliott said: "We've been moving away from having standalone stores, and strategically really making Edgars a destination. In fact, we're going in the other direction rather than trying to take our brand outside of the Edgars format."

In Edcon's revival plan, the retailer shut its Red Square and Boardmans chains, moving them into the bigger Edgars store format as part of its spatial rationalisation.

The space consolidation of Edgars beauty and home divisions has been a "fantastic success" and has increased foot traffic in the stores, said Elliott.

"We've been able to migrate, in home, in excess of 50% of our sales into the Edgars stores, and in fact with Edgars beauty over 65%.

"From a profitability point of view, it's honestly been a spectacular success . we're very happy with the way that it's making a difference to our profitability."

Though kiddies' wear and cosmetics represent smaller spaces compared with ladies' and men's, the units are the most productive, he said.

Over a period of 14 months, the group has reduced by more than 10% the amount of retail space in its Edgars stores.