Nearly 18 months ago, Durban-based Retailability bought Edgars, after an extended period of uncertainty when it wasn’t clear if SA’s iconic retail brand would even survive.
Until that point, Grant Pattison, the former Edcon CEO, had been working 20-hour days to save the clothing chain that first opened its doors in Joburg’s Joubert Street in 1929.
Pattison had already sold some assets (such as La Senza and Edgars Zimbabwe) and rationalised others (Red Square merged into Edgars Beauty and Boardmans was swallowed by Edgars Home). But when Covid hit, all bets were off.
The lockdown left an already struggling group without any runway. In April 2020, Edgars filed for voluntary liquidation, and the business rescue practitioners said the only way to save it was an "accelerated sale" of its divisions.
Many were surprised, however, when the relatively unknown Retailability popped up, and said it was keen to buy 131 of the 194 Edgars stores. In the end it took over 114 stores, at a price thought to be about R400m.
Fast forward 18 months, and Retailability has done what few thought possible: breathed new life into an Edgars brand that some thought couldn’t be salvaged.
Retailability CEO Norman Drieselmann tells the FM he soon realised where Edgars’ problems lay: it had become too niche, and had lost relevance with average South Africans.
In a survey before the deal was done, customers said "the fashionability was boring … people said this is where my mom shops, and it was difficult to find your way around".
So Drieselmann’s turnaround plan targeted precisely these aspects: prices were slashed, walls were knocked down to open up the layout, staff were encouraged to engage with customers and merchandising was overhauled so that products were easier to access.
What is most remarkable is that the Edgars stores Retailability bought are now profitable — less than two years after the deal was done, and despite the fact that prices were cut by 12% across the board.
"The repositioning is bearing fruit — we gained market share every month for the past nine months," he says, citing statistics from the Retail Liaison Committee.
It may surprise some that Retailability has had this sort of success, given that, in financial circles, it’s a relatively unknown quantity. Compared to Edgars’ blue chip 93-year history, Retailability started only in 1984 as a clothing importer, opening its first two stores in Witbank and Middelburg two years later.
Yet in that short time, it has carved out a formidable reputation. Prior to the Edgars deal, it had about 460 stores in SA, Namibia, Botswana, Lesotho and Swaziland, under brands including Beaver Canoe and Style.
We wanted to position Edgars to what made it great— and I think we’ve hit that nail on the head
— Norman Drieselmann
It helped, of course, that the Edgars deal wasn’t Retailability’s first rodeo.
In 2017 it bought Legit from Edcon for R637m — something which Drieselmann describes as a "dress rehearsal" for the much bigger deal three years later.
"This is not our first acquisition and won’t be our last. We bought Legit … it performed really well … Edgars will be our next. Who knows from there?"
Still, figuring out the state of the business — one it took over at the height of Covid, with an existing pipeline of pre-ordered clothing products — was tricky.
"We had to fix the engines while the plane was flying," he says.
The shift in profitability is all the more remarkable given that Edgars was directly in the firing line during the unrest in July 2021, when a delinquent police force, and an ineffectual government, stood by and watched as KwaZulu-Natal was looted, leaving retailers and residents to fend off the criminals on their own.
In Edgars’ case, its distribution centre, just outside Mount Edgecombe, was burnt to the ground.
"This put us on the back foot, but it didn’t hamper results. The fire was on Tuesday morning and on Wednesday morning we were looking at sites," says Drieselmann.
If anything, though, it vindicated the decision to buy the Edgars stores: the recovery illustrates that it still has a strong brand and a loyal following. The imperative, of course, was to fix the shop floor, after years of deep neglect.
But if this is a tale of a revival that began on the shopfloor, how is the actual fashion different to, say, five years back?
Drieselmann says one of the biggest differences is that his team is trying to tailor commercial fashion for the SA market, rather than relying on "edgy fashion" or international brands that are of limited relevance to the SA consumer.
Edgars’ new focus, he says, is on "private label" clothing — items that are manufactured for the store directly, and aren’t sold under any well-known global brand.
"[That’s] what’s driving our business. We have brands – Puma, Converse, Vans and Guess – all the key major international fashion brands, and they will forever be a part of the offering, they are core to the Edgars DNA. But private label is what will position us for growth into the future."
Retailability has now settled on a ratio of about 45% local products; 55% imported. "At the moment we’re quite comfortable with that as a ratio. As with everything, every season you re-evaluate," says Drieselmann.
At the same time, Edgars’ cosmetics and beauty performance has improved, after a tough period during the early lockdown when events were cancelled, and it seemed entirely plausible that no-one would ever dress up or head outdoors again.
Yet Drieselmann says the old Red Square business — fragrance and skin care products — has gained market share, and now accounts for about a quarter of sales. Which is some feat, as the competitors include Woolworths, TFG and Truworths.
Edgars has also dramatically cut its homeware range. By the end of March, homeware products will be available in just 20 stores (and online).
"It’s been a tough journey but thoroughly rewarding," says Drieselmann. "When else do you, as a small SA business, get to own an iconic brand and save 7,000 jobs, preserve more than 400,000m² of leased space and help keep the economy going?
"It’s a once-in-a-lifetime opportunity."
You may say, well, Retailability already owned 460 stores, and it bought only 114 Edgars stores. But those Edgars stores were more than four times larger than the former Retailability business. And that’s before you throw in the fact that extracting a company from business rescue comes with its own legal and supply chain headaches.
Drieselmann puts the turnaround down to the "entrepreneurial backbone" of his group.
If anything, it illustrated the reasons why Retailability reckoned it could salvage the business. These included the fact that Edgars had a strong brand and a loyal following, and that it serviced a market to which Retailability didn’t have access.
This year, says Drieselmann, Edgars will enter a new phase of its recovery. The first phase of the takeover was the "stabilisation phase".
"We wanted to exit this phase having repositioned the business in such a way it can be sustainably profitable. We wanted to position Edgars to what made it great in its day — and I think we’ve hit that nail on the head."
The second phase, being launched now, will be the growth phase.
"We want to trade hard and grow. The early signs are that 2022 is going to be closer to a normalised year of trade," he says.
That’s some statement of intent. A few years ago, you wouldn’t have heard the word "growth" too often in any discussion about Edgars’ future.
Yet Retailability has already opened four new stores — expanding the Edgars chain to 118 — after opening in the centre of Durban, inner-city Joburg, Thembisa and in Mpumalanga.
The business now occupies 440,000m² — which places it among the top five retailers in SA in terms of space. So you can imagine that others breathing a sigh of relief at Retailability’s success are the mall owners, including Hyprop, Growthpoint, Attacq and Liberty Two Degrees.
At one stage, all the companies in the Edcon group — including Edgars and Jet — accounted for about 6%-7% of the entire gross lettable area across SA’s 2,000 or so shopping malls. Had Edgars folded completely, the property companies would have taken a beating.
Edgars’ revival, however, will have wrong-footed the experts.
In 2020, analysts from SBG Securities said they believed that Retailability would "significantly shrink the store footprint", probably to between 80 and 100 stores, and shift the business to a "value offering".
Had this happened, the analysts believed Edgars would have surrendered about 30% of its market share in the beauty industry.
Instead, while Retailability has cut Edgars’ prices, the number of stores is growing and its beauty area is trading out of its socks.
Nonetheless, there have been some interesting shifts in performance.
For example, two years ago, the Edgars store in Sandton City was the best performer in the group; today, that accolade goes to the store at the Gateway mall in Umhlanga.
This, says Drieselmann, is probably a factor of the work-from-home trend during Covid, with fewer people working in Sandton, and the fact that international tourism dried up during the lockdown.
At the same time, there’s been a slight drop-off in accounts, as cash sales continue to outstrip credit sales — a notable shift, since Edgars made its name as the first clothing retailer to offer "buy now, pay later" credit sales.
Nor is it the big cities driving sales any more. "Our growth has been highest in towns and secondary metro markets, fuelled by the broader appeal behind our private label fashion product," says Drieselmann.
So what about online? Every other retailer seems to be in a scramble to grab e-commerce. Checkers’ eye-catching success in launching Sixty60 (leaving the first mover, Woolworths, in the dust) shows that you ignore this market at your peril.
Edgars is behind the curve here — online sales make up just 1% of turnover, which Drieselmann admits is "small relative to our peers".
But he’s not pushing too hard on this right now, arguing that online sales won’t be as significant in SA as they are in Europe or the US, say, over the next two to three years. The internet, it seems, will have to wait for the next phase of Edgars’ recovery.
Nonetheless, growth is critical to the "new Edgars" — but it seems Retailability’s plan to expand will be through a fierce application of first-principles retailing: proper merchandising on the shop floor, getting products people actually like, and putting stores in the right places.
Drieselmann promises no "knee-jerk" fads. "The biggest danger in retail is to run after the next shiny thing before finishing the first one. But we won’t make that mistake," he says.
Discipline, it seems, will be the motto of the new Edgars. But the fact that the stores are now profitable — few analysts would have bet on that a few years ago — suggests that Retailability’s turnaround is already something of a coup.
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