Abil gets Ellerines to slash 2 000 jobs, close 81 outlets
February 11, 2009
By Tom Robbins
Ellerines had retrenched more than 2 000 workers in the past year and closed 81 stores as new owner African Bank Investments Limited (Abil) moved in to execute a cost cutting programme at the furniture retailer, the mass market lender said on Tuesday.
Both Abil and JD Group were now more confident that the worst was over in their cyclical credit retail chains, after they moved to rid poor paying customers from their books.
Ellerines staff was reduced by 12 percent to 15 351, while the stores were cut by 6.5 percent to 1 161 after the furniture sector was found to be overtraded in the downturn.
Product sales for the first quarter were down 24.4 percent to R1.4-billion as Abil tightened lending criteria at Ellerines, because the retailer had been too "liberal" before the acquisition in 2008.
Credit acceptance rates declined from 73 percent in the quarter to December 2007 to 67 percent in the same quarter last year.
The 67 percent acceptance rate was up from a low of 56 percent in April, as the group opened its doors to easier credit on the belief that the worst bad debts were being worked out of the system.
Abil said it expected Ellerines sales to increase 10 percent in the last nine months of this financial year.
Retail margins had firmed due to better merchandise management, the bank said, without giving further details.
"Overall it's a tale of two businesses at different stages in their development," Godwill Chahwahwa, an investment analyst at Coronation Fund Managers, commented on Abil and Ellerines in a Reuters report.
"There's the African Bank business, which is growing quite strongly on the known strategy of reducing price and extending loans to a wider market," Chahwahwa said.
"Ellerines is a business bought at a time when the strategy was stated that they would have to take very big steps to rationalise the business, and I think they are right in the middle of that process. In the short term, it does look a bit weaker, it does look like the business [Ellerines] is under pressure, but this is a deliberate strategy that the business is being taken through to strengthen it," he said.
JD Group has said its cyclical credit retail business is turning around.
In January, JD Group said its credit division sales fell only marginally, bearing out an earlier statement that the cycle was improving for credit retailers.
Product sales for the four months to January at JD Group's credit chains, which include Barnetts and Joshua Doore, were down 1.4 percent from a year earlier, the group said. In the year to August, sales fell 11.6 percent to R5.2-billion.
At its annual results presentation in November, David Sussman, the executive chairman, said the consumer cycle had "got to the bottom" and there were already "exciting" signs of recovery.
|
|
