SA’s largest non-food retailer Edcon is set to reduce its size further with the sale of its 104-store Edgars Active and High Key chain to Cape Town-based retailer Footgear for an undisclosed amount.
The deal was announced by Footgear and Old Mutual Private Equity (OMPE) on Monday. OMPE last month became a majority shareholder in Footgear, a growing player in the branded footwear retail arena with 63 stores largely in the Western Cape and Gauteng.
The deal will see Edcon’s total retail footprint decline to around 1 100 stores countrywide, largely under its Edgars, Jet and CNA chains. Since 2018 it has closed some 150 stores across the country as part of an overhaul to bring it back to profitability.
Neither Edcon CEO Grant Pattison nor Footgear CEO Neil Stephens would disclose the value of the transaction on Monday, but Pattison told Moneyweb that it was a “Net asset value” deal.
Worth noting is Edcon’s sale of its 216-store women’s fashion chain Legit in 2017 (before Pattison joined) to Durban-based retail group Retailability for R637 million. Edgars Active is just less than half the size of Legit in terms of store numbers.
Retail analysts contacted by Moneyweb would not comment on the Edgars Active deal as Edcon is no longer listed.
Pattison says Edgars Active’s 104 stores includes the High Key stores (the name Edcon developed to rebrand the Edgars Active stores into). “This conversion was stopped when the sale [to Footgear] process started. The deal will not result in any net job losses as all the employees will either be transferred to Footgear or be retained within Edgars and Jet.”
He adds: “The deal will see all Edgars Active and High Key stores being rebranded under Footgear over several months. The Edgars Active brand will be retained by Edcon for use within Edgars stores, while Jabari – a streetwear clothing line that Edgars has exclusive rights to – will be retained and will still be available at Edgars.”
The deal means Footgear will almost triple its store numbers nationally as it looks to take on the likes of Pepkor’s Tekkie Town and the Foschini Group’s Sportscene ‘athleisure’ chain.
Chumani Kula, investment principal at OMPE, says the deal marks a significant milestone in Footgear’s expansion ambitions, propelling it to become a key player in the South African branded sport and lifestyle market. It will significantly enhance Footgear’s scale and footprint.
“We look forward to supporting the management team as they roll out Footgear’s highly successful formula across all of the newly acquired stores,” he adds.
Kula told Moneyweb that OMPE had been looking to acquire Tekkie Town several years ago. “We had a crack at Tekkie Town, but it did not work out. Since then we have been on the look out for another investment opportunity in the burgeoning branded footwear and so-called ‘athleisure’ retail market. This market remains robust and has shown relative resilience even in times of slower macro-economic growth.”
He adds: “We have found a perfect partner in Footgear. Our strategy is to target mid-market companies with sales of between R500 million and R1 billion and the potential to be scaled significantly. We put the capital behind them to grow. We target agile and entrepreneurial companies that want to grow market share.”
Kula says the Edgars Active deal gives Footgear a national presence, which it plans to grow to beyond 200 stores within the next few years. The acquisition of a majority stake in Footgear last month represents OMPE’s third investment into retail in SA, with the others being its stake in MoreCorp, which owns The Pro Shop, and Tiger Wheel & Tyre.
OMPE is the direct private equity investing arm of Old Mutual Alternative Investments, which manages over US$4 billion in assets across private equity, infrastructure and various impact funds in sub-Saharan Africa.
Footgear’s Stephens says the deal will ramp up Footgear’s presence nationally. “If we had carried on with our organic growth at 15 stores per year it would’ve taken us more than seven years to add the number of stores within the Edgars Active chain.”
He adds: “The athleisure market continues to grow at a faster pace than the rest of the general apparel market. Our customers love our offering and our service, and this deal gives us the opportunity to get to a lot more of them a lot faster.”
He says 95% of the acquired stores are in locations and provinces where Footgear does not have a strong presence.