Cape Town – Lewis Group delivered a resilient performance in a weak retail trading environment in the year to March 2024 as operating profit increased by 13.1% to R690 million. The group reported continued strong credit sales growth, improved margins, robust growth in the debtors’ book and an all-time high level of satisfactory paying customers.
The group’s earnings were 6.2% higher at R436 million and earnings per share increased by 15.9% to 806 cents, supported by the positive leverage effect from the group’s share repurchase programme.
The group has returned R1.3 billion to shareholders since the start of its buy-back programme in 2017, repurchasing 35.7 million shares. During the year 4.2 million shares were repurchased at a cost of R170 million.
The total dividend was increased by 21.1% to 500 cents per share as the board showed its confidence in the group’s prospects and cash generating ability.
CEO Johan Enslin said that over the past five years the group has returned an average of 113% of earnings to shareholders through dividend payments and share buybacks.
Merchandise sales increased by 4.7% to R4.7 billion for the year. After increasing by 4.2% for the first nine months, merchandise sales grew by 6.7% during the challenging trading conditions in the fourth quarter.
Enslin said the strong credit sales growth trend continued as credit sales increased by 15.8%. Credit sales accounted for 66.2% of total merchandise sales compared to 59.9% last year.
However, pressure on consumers’ disposable income from high energy, food, fuel and borrowing costs continued to constrain the group’s cash sales which declined by 11.8%, adversely impacting the performance of the group’s cash retail brand UFO.
Total revenue, including merchandise sales and other revenue, increased by 9.8% to R8.2 billion.
The gross profit margin strengthened by 250 basis points to 43.1%, benefitting from effective margin management on new merchandise ranges.
Enslin said a key feature of the results was the improving quality of the group’s debtors portfolio. “The level of satisfactory paying customers increased to a record 81.3% from 80.4% last year and collection rates ended the year at 79.7%. Net bad debts reduced to 11.2% from 13.1% in the prior year,” he said.
Management capitalised on opportunities to acquire well located trading space to accelerate the expansion of its store network. A net 29 new stores were opened, including 10 new Bedzone stores and a net 4 new stores outside of South Africa. The group’s total store base of 869 includes 138 stores in neighbouring Namibia, Botswana, Lesotho and Eswatini.
Commenting on the outlook for the new financial year, Enslin said trading conditions are not expected to improve in the short to medium-term as consumer spending and confidence remain depressed.
“Interest rates are going to remain higher for longer than originally forecast, while fuel and food inflation as well as unemployment remain high. Port congestion, shipping delays and sharp sea freight rate increases are likely to continue to negatively impact economic growth. Political uncertainty and social instability in the aftermath of the elections pose a major risk to the trading environment.”
Enslin said despite the mounting macroeconomic headwinds, the group continues to invest for longer-term growth. “We are planning to open 20 new stores in the 2025 financial year and will continue to invest in the expansion of our debtors’ book as consumer demand for credit is expected to be maintained,” he added.
Ends
Issued by Tier 1 Investor Relations on behalf of Lewis Group
Enquiries Graeme Lillie Tier 1 Investor Relations 082 468 1507
Cape Town – Lewis Group today reported strong credit sales growth and a resilient debtors’ book performance for the six months to September 2023, while the group’s cash sales reflect the pressure on cash-strapped South African consumers.
Earnings were 6.2% lower at R195 million while earnings per share increased by 2.6% to 355 cents per share, supported by the positive leverage effect from the group’s share repurchase programme. Headline earnings decreased by 14.6% and headline earnings per share decreased by 6.6% to 372 cents.
The interim dividend has been increased by 2.6% to 200 cents per share.
The group has returned R1.8 billion to shareholders since the start of its buy-back programme, repurchasing 45.8 million shares. In the first half of the year, the group repurchased 3.1 million shares at a cost of R124 million.
Merchandise sales grew by 4.8% to R2.2 billion. After a difficult first quarter of the financial year, sales benefited from new product ranges and strong advertising campaigns to increase by 8.5% for the second quarter. The group’s total revenue, comprising merchandise sales and other revenue, increased by 8.3% to R3.8 billion.
CEO Johan Enslin said the strong credit sales growth trend of the past two years continued as credit sales increased by 19.5% across all the group’s traditional brands, contributing to the debtors’ book growing by 10.8%.
“Despite the economic pressure facing consumers, the quality of the group’s debtors’ portfolio has been sustained. The percentage of satisfactory paid customers increased to 79.9% from 78.8% in the prior period while collection rates were stable at 80.9% compared to 81.7% last year,” he said.
The pressure on disposable income from higher fuel, energy, food and borrowing costs is reflected in the continued slowdown in the group’s cash sales. This adversely impacted the performance of UFO, the group’s cash retail brand, with sales declining by 14.3%.
Enslin said management remains focused on improving UFO’s performance through exclusive merchandise offerings and enhanced social media marketing strategies. “As part of the rightsizing of UFO we implemented extensive cost saving measures which resulted in the business reporting an operating profit for the half year,” he said.
The group’s gross profit margin strengthened by 140 basis points to 40.7%, within the group’s target range of 40% – 42%. Enslin said the margin benefited from the 23% reduction in inventory as management reduced stock closer to historic levels.
Management took advantage of opportunities to acquire well located trading space to accelerate its store expansion, opening a net 28 new stores which included five stores outside of South Africa. The new stores are trading well and a further 10 stores are planned for the second half of the year.
The group’s total store footprint of 868 includes 138 stores in neighbouring Namibia, Botswana, Lesotho and Eswatini. Sales in these stores, which represent 15.9% of the store base, accounted for 18.7% of the group’s sales.
On the outlook for the second half of the financial year, Enslin said consumer spending will remain depressed in the months ahead. “We expect the current demand for credit to continue and will capitalise on the strength of our loyal customer base and differentiated merchandise offering to gain further market share,” he said.
Load shedding and congestion at the local ports are likely to continue to negatively impact economic growth, he said.
Enslin said the group has proven its resilience through previous economic downturns and management is confident in the group’s medium-term prospects.
Cape Town – Lewis Group reported resilient credit sales growth and a strong debtors’ book performance in the year to March 2023, while the group’s overall results reflect the poor state of consumers in South Africa’s low growth, high inflationary environment.
Headline earnings were 9.8% lower at R506 million while headline earnings per share increased by 1.0% to 857 cents, reflecting the positive leverage from the group’s aggressive share repurchase programme.
The group has returned over R1.1 billion to shareholders since the start of the buy-back programme in 2017, repurchasing 31.5 million shares. In the past year the group repurchased 5.5 million shares at a cost of R276 million.
The board maintained the total dividend at 413 cents per share, showing its confidence in the group’s cash generating capability and prospects.
CEO Johan Enslin said escalating fuel, energy, food and borrowing costs is placing significant pressure on spending, with load shedding weighing heavily on consumer sentiment and economic growth.
“Despite this weak consumer environment, the group’s debtors’ book showed good growth of 7.5%. Our collection rates strengthened from 79.0% to 80.8% due to enhanced collection strategies. The percentage of satisfactory paid accounts increased to a record level of 80.4%, improving significantly from 68.4% five years ago,” he said.
Credit sales grew strongly by 18.1% and accounted for 59.9% of total merchandise sales, compared to 51.4% in the prior year. Cash sales slowed further and declined by 16.3%.
Total merchandise sales increased by 1.4% to R4.4 billion. Sales in the traditional retail brands of Lewis, Beares and Best Home & Electric increased by 3.5% while the cash retailer UFO reported a decline of 12.5%. Total revenue increased by 3.1% to R7.5 billion.
Enslin said the group has continued to expand its store footprint and opened a net 21 new stores, the highest net store openings since 2016, bringing the store base to 840. “We will be accelerating our store expansion programme in response to opportunities to acquire well located trading space and plan to open 25 stores in the new financial year.”
The group’s gross profit margin strengthened to 40.6% despite increasing cost pressures. Enslin said the group has secured better shipping rates “which are approximately 70% lower than the inflated sea freight charges reported since the outbreak of the Covid-19 pandemic in 2020”. UFO in particular will benefit from these lower rates as approximately 65% of the chain’s merchandise is imported, he said.
On the outlook for the new financial year, Enslin said the current tough retail conditions are likely to deteriorate further with increasing pressure on consumer disposable income due to rising interest rates, transport costs, energy and food prices. Electricity load shedding will continue to disrupt trade and impact sales patterns.
“The consumer appetite for credit is expected to continue into the new financial year while the more favourable shipping rates on imported products should support sales growth. However, the weakening Rand could put pressure on the group’s import programme and pricing strategy.”
“The group has proven its resilience through previous economic downturns and we are confident in the group’s medium-term prospects,” he added.
Cape Town – Lewis Group increased merchandise sales by 4.3% to R2.1 billion in the six months to September 2022 as trading conditions weakened significantly in the second quarter of the financial year. Credit sales grew by 16.4% while cash sales declined by 8.1%, reflecting the pressure on consumer disposable income.
The group increased headline earnings by 4.4% to R236 million while headline earnings per share grew by 19.2% to 393 cents, reflecting the positive leverage effect from the group’s aggressive share repurchase programme.
Since the commencement of its earnings enhancing share repurchase programme in 2017, the group has bought back 29.9 million shares and returned over R1 billion to shareholders. In the past six months the group repurchased 3.8 million shares at a cost of R192 million.
The interim dividend was maintained at 195 cents per share.
Chief executive officer Johan Enslin said escalating food, fuel and electricity costs, combined with rising interest rates and record high unemployment levels, impacted consumer spending and confidence in the six months.
“Our traditional retail brands of Lewis, Beares and Best Home & Electric have proven more resilient in the current environment, supported by increased credit sales,” he said. “Cash sales in particular have been impacted by the inflationary pressures facing consumers, with the biggest impact being felt by the group’s cash retail brand UFO.”
Sales in the group’s 131 stores outside South Africa increased by 6.0% and accounted for 18.6% of total sales.
The group’s store footprint increased to 829 following the opening of a net 10 new stores across all brands, including the first Best Home & Electric store in Lesotho. The group will continue to expand its store base despite the difficult trading conditions and remains on track to open a net 16 new stores for the financial year.
Cape Town – Lewis Group today reported a strong merchandise sales and operating performance for the year to March 2022 despite weakening retail trading conditions, with headline earnings increasing by 21.2% to R561 million. Headline earnings per share increased by 37.7% to 849 cents, reflecting the positive leverage effect from the group’s aggressive share repurchase programme.
The total dividend was increased by 25.9% to 413 cents per share.
Chief executive officer Johan Enslin said the group reported a competitive performance against the backdrop of the tightening domestic economy, the July 2021 civil unrest as well as local and international supply chain challenges.
The strong operating performance from the Lewis, Best Home and Electric, and Beares brands was adversely impacted by impairment charges totalling R131 million. Operating profit before impairments and capital items increased by 4.3% to R767 million. Merchandise sales increased by 11.5% to R4.4 billion, with credit sales growing by 16.7% and cash sales by 6.4%. Enslin said the group continues to carry higher inventory levels to ensure stock availability to meet customer demand and counter the ongoing challenges in the supply chain such as the global shortage of shipping containers and severe port congestion.
Sales in the group’s 129 stores outside South Africa increased by 11.9% and accounted for 17.9% of total sales. The group’s store footprint increased to 819 following the opening of a net 12 new stores across all brands during the year.
The quality of the group’s debtors’ book continued to improve. Collection rates strengthened to 79.0% from 71.8% in 2021 while the percentage of satisfactory paid accounts increased to 79.0% from 74.4% last year. Debtor costs continued the declining trend, reducing by 13.6% over last year. Cash generated from operations totalled R863 million and the group’s balance sheet remains robust, with the net asset value per share increasing by 10.4%.
The group has continued its earnings enhancing share repurchase programme, buying back 8.7 million shares at a cost of R353 million. Since the start of the buy-back programme in 2017, the group has repurchased 26 million shares for R829 million.
On the outlook for the group, Enslin said the current challenging retail trading conditions are expected to persist in the short- to medium-term. “There is increasing pressure on disposable income with rising interest rates, transport costs, energy and food prices while the ongoing load shedding is disrupting trade and impacting sales patterns.” “In this constrained environment we plan to increase market share through innovative marketing strategies which will be supported by new merchandise ranges across all of our brands and high levels of stock availability,” he added.
Enslin said despite the difficult trading conditions the group will continue to expand its store base, with a net 16 new stores planned for the 2023 financial year while a further 150 stores will be revamped.
For further information kindly contact Graeme Lillie Tier 1 Investor Relations 082 468 1507
Cape Town – Lewis Group delivered another strong financial performance in the Covid-19 impacted trading environment for the six months to September 2021 as merchandise sales increased by 20.7% to R1.99 billion and headline earnings grew by 24.5% to R226 million.
The group’s headline earnings per share increased by 39.7% to 330 cents due to the positive leverage effect of the group’s share repurchase programme.
An interim dividend of 195 cents per share was declared, an increase of 46.6%.
Chief executive officer Johan Enslin said the group generated strong sales growth despite the impact of the civil unrest in KwaZulu-Natal and Gauteng on trading in the July to September quarter.
Credit sales grew by 24.4% and cash sales by 17.1%, with credit sales accounting for 50.6% (H1 2021: 49.1%) of total merchandise sales.
He said sales growth was supported by high levels of stock availability during a period of significant supply chain challenges. “We continued to pursue our strategy of increasing inventory levels to ensure adequate stock cover to meet customer demand and to counter the ongoing challenges in the supply chain. Our good stock position is a competitive advantage going into Black Friday and the festive season,” he said.
The health of the group’s debtors’ book continues to improve, with collection rates strengthening to 78.7% (H1 2021: 66.5%), the percentage of satisfactory paid accounts increasing to a 14-year high and debtor costs reducing by 32.8%.
Solid merchandise sales growth and reduced debtor costs contributed to operating profit increasing by 23.3% to R341.2 million, with the operating profit margin improving from 16.8% to 17.1%.
The group expanded its store footprint to 817 with the opening of a net 10 new stores across all brands.
In the KwaZulu-Natal civil unrest 57 stores were damaged and looted, 51 of which have reopened and the remaining six will reopen once the damages have been repaired. The group’s SASRIA claim amounted to R79 million, with R43 million having been paid out and recognised in the results to end September. The balance of the insurance claim of R36 million is expected to be received before the end of the financial year.
The group repurchased 5.4 million shares at a cost of R194.5 million during the past six months. Since the start of the share repurchase programme in 2017, the group has bought back 22.7 million shares at an average price of R29.52 per share.
On the outlook for the remainder of the financial year, Enslin said while sales and collections momentum has continued into October, management expects trading conditions to become increasingly challenging in the second half of the financial year.
“High levels of unemployment, rising interest rates and the sensitivity of our core target market to higher fuel and food prices is expected to constrain spending in the months ahead. This will be compounded by the widespread electricity load shedding which is disrupting trade and impacting sales. Covid-19 continues to pose a risk to the trading outlook,” cautioned Enslin.
Cape Town – Lewis Group overcame the adverse impact of the Covid-19 trading restrictions to deliver a strong operating performance for the year to March 2021, with headline earnings increasing by 126.4% to R463.0 million.
A total dividend of 328 cents per share has been declared, an increase of 77.3% over last year.
The group’s balance sheet remains robust with no borrowings while cash generated from operations increased by 46.8% to R915 million.
Chief executive officer Johan Enslin said the growth in operating profit of 174.2% was driven by buoyant merchandise sales which recovered strongly following the lockdown, together with the improving quality of the debtors’ book and tight cost management.
Merchandise sales increased by 6.7% to R3.9 billion. Following a decline of 4.9% in the Covid-19 impacted first half of the year, sales grew by 17.0% in the second half of the year. Cash sales increased by 25.9%, while credit sales declined by 7.9% as a result of the hard lockdown.
Enslin said sales were supported by new merchandise ranges introduced in the second half of the year and high levels of stock availability. “We took a strategic decision not to cancel any orders when the country went into lockdown which ensured that our stores were well stocked to meet the post lockdown demand.”
The group expanded its gross profit margin by 80 basis points to 41.8% while the operating profit margin more than doubled from 6.9% to 17.7%.
Operating costs continued to be tightly managed and reduced by 2.9%. Debtor costs reduced by 19.5% over last year when an additional Covid-19 debtors’ impairment provision of R189.5 million was raised. This reflects the improving quality of the debtors’ book which is being supported by enhanced collection practices.
The health of the debtors’ book continued to improve during the year, with satisfactory paid customers increasing from 70.5% in 2020 to 74.4% in 2021. After losing approximately R250 million in customer account collections when stores were closed in April and May 2020, collection rates recovered steadily after lockdown and averaged 71.8% for the year compared to 74.5% in the previous year.
The group repurchased 5.4 million shares during the year at an average market price of R20.92 per share. Since the start of the share repurchase programme in 2017, the group has bought back 17.3 million shares at an average price of R27.38 per share.
Over the past year the group opened 24 and closed 11 stores, increasing the store base to 807. A net 10 Beares stores were opened while UFO expanded its store footprint in the Eastern Cape and opened its first store in the Western Cape. Enslin said the group plans to open 15 to 20 stores in the new financial year, mainly in the Beares and UFO chains.
On the outlook for the group, Enslin said the sales momentum has continued into the new financial year, supported by good stock availability.
“We have increased our inventory to ensure adequate stock levels to counter the challenges in the supply chain, including the global shortage of shipping containers and severe port congestion.”
Enslin cautioned that the group is expecting trading conditions to become increasingly challenging in the months ahead. “The potential impact of a third wave of Covid-19 infections, together with Covid relief grants being discontinued, could result in further economic pressure on our customer base,” he said.
Cape Town – Lewis Group overcame severe trading restrictions in the first two months of the national Covid-19 lockdown to recover strongly and increase operating profit by 13.6% for the six months to September 2020.
Headline earnings per share increased by 9.9% to 236 cents and the board declared an interim dividend of 133 cents per share, 10.8% higher than last year.
The group owns the Lewis, Best Home and Electric, Beares and UFO brands. All stores in South Africa were closed from the start of the national lockdown on 27 March 2020 and reopened on 1 June 2020.
Chief executive officer Johan Enslin said the group experienced strong customer demand following the reopening of the stores at the beginning of June.
“While sales growth was initially supported by pent up demand and savings accumulated during lockdown, this momentum was maintained which contributed to sales increasing by 20.1% for the four months to September 2020.”
Cash sales for the four months increased by 46%, with credit sales growing by 1.5%.
Enslin estimated that the group lost approximately R360 million in merchandise sales and R250 million in customer account collections as a result of the lockdown. “Owing to these trading conditions, merchandise sales for the six months were 4.9% lower at R1.65 billion,” he said.
The group expanded its gross profit margin by 20 basis points to 40.5% while the operating profit margin improved by 120 basis points to 9.1%.
Enslin said the group’s robust balance sheet and cash position ensured that no bank funding was required as the business remained cash positive during the lockdown period. At the end of September 2020, the group was unborrowed.
The group’s debtor book performed satisfactorily in the six months to September 2020 and the board believes that the impairment provisions are adequate to meet future bad debts. Collection rates declined to 66.5% for the six months owing to the slow collections during the initial stages of lockdown but recovered to average 73.2% for the second quarter.
During the past six months the group opened a net 11 new stores, increasing the store footprint to 805. This includes 125 stores in the neighbouring Namibia, Botswana, Eswatini and Lesotho. Enslin said the group remains on track to open 20 new stores across its trading brands in the 2021 financial year.
The group repurchased 1.6 million shares during the reporting period, at an average market price of R16.91 per share. Since the start of the share repurchase programme in 2017, the group has bought back 13.6 million shares at an average price of R28.65 per share.
On the outlook for the group, Enslin said trading conditions are expected to become more challenging into the 2021 calendar year, with customers in the group’s lower to middle income target market being vulnerable to the rising levels of unemployment.
“Extensive merchandise and marketing promotions have been developed for the two biggest trading periods of the year, covering this week’s Black Friday and the festive season in December, which we believe is an opportunity for the group to gain market share,” he added.
For further information kindly contact
Graeme Lillie Tier 1 Investor Relations 082 468 1507
Cape Town – Lewis Group delivered a solid trading and operational performance for the year to March 2020 before being impacted by Covid-19 and the national lockdown which contributed to headline earnings per share declining by 30.8% to 260 cents.
Covid-19 adjustments reduced profit before taxation by R339 million and headline earnings by R224 million. This includes an increase in the debtors impairment provision of R123 million as a result of lost collections in March due to store closures during lockdown, a further increase of R190 million in the debtors impairment provision for the potential economic disruption of Covid-19 and its impact on future customer account payments and an impairment charge of R27 million for the possible future impact of Covid-19 in terms of the IFRS 16 lease accounting standard.
Despite the financial effects of the pandemic and the resultant lower earnings, the directors have shown confidence in the group’s prospects by declaring a total dividend of 185 cents per share for the year (2019: 234 cents), a dividend payout ratio of 79%.
Chief executive Johan Enslin said the group’s business model proved resilient during the lockdown trading restrictions. “The strength of our balance sheet and cash position ensured that we did not need to access any bank funding during the lockdown period, despite all our stores being closed for an extended period,” he said.
After increasing merchandise sales by 6.9% for the first 11 months of the year, the group lost crucial trading days over the March month-end period at the start of the lockdown on 27 March 2020. This resulted in losing merchandise sales of approximately R80 million and customer account collections of R180 million. Merchandise sales growth for the 12 months therefore slowed to 4.7%.
Other revenue, consisting of finance charges and initiation fees, insurance premiums and services rendered, increased by 5.8%. Total revenue, comprising merchandise sales and other revenue, increased by 5.2% to R6.5 billion for the year.
The group’s gross profit margin at 41.0% (2019: 41.2%) remains at the upper end of management’s target range of 38% to 42%.
The credit health of the group’s customer base pre-lockdown is reflected in the decline of R41 million in net bad debts for the year. Net bad debts as a percentage of debtors reduced to 13.9% from 15.1% in the prior year.
Collection rates increased to 77.3% for the first 11 months of the year to February 2020. Owing to the loss of key trading days at the end of March due to lockdown, the collection rate for the year slowed to 74.5%.
Cash generated from operations totalled R636 million and the group’s gearing ratio was 12% at year end.
The store footprint was expanded to 794 following the opening of 19 and closure of 9 stores during the year. The group plans to open 20 new stores in the 2021 financial year.
Discussing trading patterns post year end, Enslin said sales have been strong following the reopening of stores from 1 June 2020 when the country moved to lockdown level 3. Merchandise sales for June increased by 22.3% and July by 16.8%.
“The current sales momentum is being supported by pent up demand from savings accumulated during lockdown.”
“We are expecting consumer spending to contract in a post Covid-19 recessionary environment. Customers in our traditional lower to middle income target market are also vulnerable to the rising levels of unemployment in the country due to the impact of the pandemic,” he added.
Graeme Lillie Tier 1 Investor Relations graeme@tier1ir.co.za 082 468 1507
Cape Town – Lewis Group increased headline earnings per share by 18.9% to 215 cents in the six months to September 2019 as the multi-brand furniture retailer delivered solid revenue growth, improved margins, reduced debtor costs and increased profitability in a deteriorating retail trading environment.
The group increased its interim dividend by 14.3% to 120 cents.
Chief executive officer Johan Enslin said the group’s strategy of diversifying across market segments and retail channels continues to gain traction.
Merchandise sales grew by 6.4% to R1.7 billion, with UFO sales up 8.8% and the traditional retail brands Lewis, Best Home and Electric, and Beares growing sales by 3.7%.
INspire, the omni-channel home shopping retailer launched in 2018, generated sales of R35.7 million for the six-month period.
Credit sales increased by 8.1%, benefiting from the change in the National Credit Act’s affordability assessment regulations, and cash sales grew by 4.1%.
The gross profit margin improved by 40 basis points to 40.3% following the launch of new merchandise ranges.
Operating profit increased by 8.9% to R211 million and the group’s operating margin expanded by 10 basis points to 6.8%.
The group’s balance sheet remains ungeared and the group has no borrowings.
Enslin said the credit health of the group’s customer base continued to improve, despite the weak consumer credit environment. Credit collection rates improved from 77.2% to 79.6% which contributed to debtor costs declining by 0.4%. He noted that the level of satisfactory paid customers at 74.2% is at its highest level since September 2008.
The group’s store base increased to 787 as 9 stores were opened and 6 closed. This includes 121 stores outside South Africa which accounted for 17.3% of total sales. The group plans to open a net 6 new stores in the second half of the year.
Discussing the outlook for the remainder of the financial year, Enslin said the group’s diversification strategy across target markets and sales channels will continue to offer resilience in the weak consumer spending environment.
He said marketing activity is being accelerated to drive sales growth, with all the group’s brands participating in Black Friday on 29 November. “We are also planning for robust festive season trading which will be supported by strong promotional campaigns and new merchandise ranges,” he added.
Enquiries: Graeme Lillie 082 468 1507
