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Bottom-line profit up 14.5% for Lewis Group – I-Net Bridge

November 8, 2010

Exclusive merchandise and an improved trading environment has seen furniture retailer Lewis Group (LEW) increase bottom-line profit by 14.5%.

“Stronger sales growth was driven by the steadily improving financial state of consumers in the Lewis target market and the focus on sourcing exclusive merchandise ranges,” said chief executive, Johan Enslin.

On Monday, the company, which sells furniture to the lower and lower-middle income market said headline earning per share (HEPS) were up 14.5% to 332.5 cents for the six months ended September 2010. Operating profit was up 10.5% to 468.9 million rand and the group’s interim dividend increased 8.3% to 156 cents per share. Credit sales increased from 68.5% to 71.7% of total sales.

Furniture and appliance retailers were among the hardest hit during the recession as a result of debt collection difficulties and a significant in sales of durable goods and big-ticket items.

But lower interest rates and a less-cautious approach to spending has seen consumers dipping into their pockets.

According to Stats SA, retail sales figures for August 2010 showed an increase of 4.6% year-on-year (y/y), with the highest annual real growth rate recorded for retailers in household furniture, appliances and equipment at 21.1%.

When asked by I-Net Bridge whether the worst was over for furniture retailers, Enslin said: “We can only speak for ourselves but with merchandise sales up 11.2% to 2.136 billion rand it’s evident that consumers are spending more.”

A retail analyst said that trading conditions in the sector had definitely picked up.

“There is a marked improvement in the furniture and appliance sector. People have more money to spend because interest rates are lower. They’re feeling more confident to part with their cash – not just for smaller price tags but for bigger items too,” he said.

Enslin added that the outlook for consumers continued to improve. “Higher real wage increases granted across most sectors of the economy are positive while retrenchments and job losses in our customer base appear to have stabilised,” he said.

He said that the company’s focus on sourcing exclusive merchandise ranges had benefited the group immensely.

“40% of our merchandise is imported. We source from South America, China