South Africa's Edcon cuts costs, pulls back from imported brands

South African retailer Edcon is cutting costs and stocking fewer premium brands, as a weaker currency makes imported fashions from the likes of Dune and Tom Tailor unaffordable even for well-heeled shoppers, it said on Friday.

The owner of Edgars and Jet clothing stores reported third-quarter sales of 8.67 billion rand ($553 million), 1.7 percent lower than a year ago, and said it would cut more staff at its head office as part of a targeted 500 million rand of cost savings this year.

Edcon, taken private in 2007 in a highly-leveraged buyout by Bain Capital, restructured its debt last year after nearly a decade of disappointing growth in Africa's most advanced economy.

Other retailers have already flagged a tough year ahead, with South Africa's economy forecast to grow by less than 1 percent.

Edcon did not disclose how many of the 3,300 jobs at its head office would go.

"We've had big input price increases and you just can't move prices up, customers won't accept it, so we've had to swallow some of that rand increase relative to the U.S. and UK currencies," Chief Executive Bernie Brookes told Reuters.

South Africa's rand has lost 20 percent of its value against the dollar since October, increasing the cost of imported clothing, most of which the retailer has had to absorb.

Edcon has started sourcing more of its clothing locally to keep down costs and lessen its exposure to currency swings, Brookes said.

The retailer wants to use more of its space for private label stock because in-house brands such as Kelso earn nearly three times more revenue per square metre than imported labels.

Edcon will review some of the standalone stores it runs with imported goods from Tom Tailor, Topshop and Dune, Brookes said.

Higher income earners are under just as much pressure as the lower earners, said Brookes, pointing at a 10 percent drop in sales on in-store credit.

$1 = 15.6788 rand