The Duchess of Cambridge in Hobbs

For a moment it seemed as if South African retail giant Edcon was on the verge of closing after almost a century of operations. Fortunately, a consortium consisting of the Unemployment Insurance Fund (UIF), debt holders and landlords came to the rescue of the troubled group in a deal that was said to have averted the loss of thousands of jobs, not to mention prevented hundreds of thousands of square feet of suddenly empty retail space in all the prime shopping centers around the country.

Edcon, whose flagship property is the department store Edgars, received a lifeline amounting to 2.7 billion South African rand, or about $190 million at current exchange. The fresh funds will allow the cash-strapped company to recapitalize.

Edcon has been struggling with a debt burden following its 2007 acquisition by U.S.-based Bain Capital in a 25 billion rand, or $176 million, private equity deal, which saw its delisting from the Johannesburg Stock Exchange (JSE). In 2016, Bain cut its losses and transferred ownership of Edcon to several of its creditors. The retailer remained in precarious shape financially and operationally, suffering from too many stores, declining sales, lost market share and an incoherent strategy.

According to an official statement, the recapitalization “will result in the removal of all of Edcon’s interest-bearing debt and introduces a new group structure and set of shareholders. Subject to certain conditions, existing holders of the notes may be entitled to nominally participate in the new shareholding structure.”

Edcon chief executive officer Grant Pattison expressed appreciation for “the very broad support received, which has been a show of unity and partnership among our diverse stakeholder group. Edcon’s existing lenders, ministries of Economic Development, Labor and Finance; labor unions Sactwu, Cosatu, Saccawu; the PIC and the UIF; as well as participating landlords, have all worked together to ensure a viable future for Edcon.”

The deal, he added, was “still subject to the normal regulatory approvals required for a transaction of this nature.”

There are sentimental reasons for keeping Edcon afloat. It has been a household name for many South Africans since 1929, when the first Edgars store opened on Joubert Street in downtown Johannesburg. Edgars grew to be southern Africa’s leading nonfood retailer of clothing, footwear, textiles, cosmetics, accessories and cellular products with a 203-store network serving a wide demographic. It carries local and international brands, in addition to its own Edgars private label brands.

There are more practical reasons to save Edcon as well. The labor unions feared there would be a “jobs massacre” should the company close and put not just thousands of employees out of work, but an entire supply chain. The South African Clothing and Textile Workers Union (Sactwu) said that, according to its research, Edcon procures 45 percent of its clothing products locally, more than any other major retailer in the country.

Edcon stores also occupy around 10 percent of South Africa’s mall space. Part of the rescue deal includes rent reductions by as much as 40 percent granted by various landlords, including Hyprop, Redefine Properties, Liberty Two Degrees and Resilient Reit.

While many have breathed a sigh of relief at the funding deal, Pattison conceded that there was a lot of work still to be done. “This is a significant step forward towards ensuring the restoration of our balance sheet and putting the company back on the path to success. It will provide management with a sufficient timeframe to implement the store estate restructure and focus on returning the business to profitability. This will be done through placing our customers at the center of our existence throughout Edgars, Jet, CNA and Thank U operating divisions,” he said.

But Edcon’s woes are more a result of its own missteps than overall market conditions. While the retailer has been clawing its way out of its seemingly endless struggles, competitor The Foschini Group (TFG) has been thriving, with its local, regional and international properties all doing well.

TFG’s portfolio encompasses 22 retail brands spread out over 3,000 stores in 33 countries across five continents, providing a lifestyle retail network that covers clothing, footwear, jewelry and the home, as well as a mobile and technology unit.

Four years ago, TFG expanded into international markets. It entered Australia with its purchase of men’s wear giant Retail Apparel Group (RAG), while its U.K. subsidiary TFG Brands (London) Ltd., has since acquired the British high street brands Hobbs, Whistles, Phase Eight, Studio 8 and Damsel in a Dress. The gamble seems to have paid off — TFG London today trades from a total of 930 points of sale worldwide, with 254 concessions and stores in 21 international markets outside of the U.K. and Ireland.

From January to September 2018, TFG London reported a 42 percent increase in sales to 318.8 million pounds. This upward sales momentum continued throughout the Christmas trading season, during which the company reported a 4.7 percent year-on-year increase in sales, despite struggles up and down the British high street.

Beyond its brick-and-mortar operations throughout sub-Saharan Africa, TFG is turning its attention to e-commerce. It has tapped Oracle to support its digital transformation strategy, consolidating its 22 brands into one online marketplace, This strategy, as stated in TFG’s 2018 annual report, involves creating “a unique online platform where customers can shop across all our TFG Africa online brands and only check out once, choosing from multiple payment options such as their TFG account card, credit or debit cards, eGift cards or SnapScan.”

Brent Curry, TFG chief information officer, explained that the aim “was to build an omniexperience for our customers; whether in-store or in their homes; offering a service that would enable us to better respond to their needs.”

The target is for online shopping to drive 5 percent of revenues by 2025. While physical stores remain the core focus, TFG acknowledges that consumer habits are rapidly evolving, and as such plans to include experiential and personalized services in-store, which will be offered through connected technology and a TFG app.