May 23, 2011
Johannesburg, May 23 (I-Net Bridge) – The improved economic health of its customers had led to an increase in sales and credit collections for furniture retailer Lewis Group (LEW), said CE Johan Enslin on Monday.
Lewis Group reported an increase in earnings of 21.6% to 781 cents a share, while merchandise sales increased by 12% to 2.3 billion rand and revenue rose by 11.4% to 4.6 billion rand.
“We can only speak for ourselves, but the furniture sector definitely seems to be out of the woods,” he told I-Net Bridge/BusinessLIVE.
Coming off a very low base after the economic downturn, a turn in the cycle has been a long time coming for furniture retailers, who bore the brunt of the recession because of debt collection difficulties and a large in sales of durable goods.
Rival JD Group (JDG) last week reported revenue growth of 9% to 7.5 billion rand and a profit surge of 44% to 231 million rand.
During the first quarter of 2011, durable and semi-durable goods retailers have seen sustained growth over the same period last year as lower interest rates and a less guarded approach to spending has seen consumers switch gears from the “essential” spending on food and necessities to big-ticket items like furniture and electronics.
“The big trend over Christmas and during the past couple of months was a nice uptick in panel TV sales – LCDs and Plasmas have really taken off. The strength of the rand is assisting consumers in a big way,” Enslin said.
He added that the affordability of TVs had even benefited customers in living standard measures (LSM) 4-7, the lower and lower-middle income markets.
Lewis Group’s merchandise strategy of sourcing exclusive and differentiated furniture ranges was enhanced with a second launch of merchandise in October 2010, which contributed to the increase in the gross margin.
“We import 20% of our furniture on a direct basis, out of countries like China and Malaysia, South America. The balance of our furniture gets sourced locally. Our strategy is to deal with smaller local suppliers – that can ensure us exclusivity of product,” Enslin said.
With 40 new stores opened in the period under review, the group’s home-grown expansion plans are well underway.
“Our three-year strategy is to increase our store base to 700 stores – we are now on 582, we believe we can get there,” Enslin added.