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Lewis Group posts strong second half performance

May 27, 2015

Cape Town – Multi-brand furniture retailer Lewis Group today reported a strong second half performance for the year to March 2015 as the group gained market share in the changing competitive environment.

Merchandise sales for the second half increased by 18%, compared to a decline of 3.5% for the first six months, driven by the exclusive merchandise offering which was supported by higher levels of promotional activity. Merchandise sales for the year grew by 7.6% (2014: decrease of 2.5%) and excluding the benefit of the recently acquired Beares chain, sales increased by 4.4%.

The group’s operating profit for the year was impacted by higher debtor costs and additional expenditure on Beares, and declined by 1.2% to R1 140 million. Headline earnings were 4.3% lower at R784 million.

The total dividend has been maintained at 517 cents per share.

Chief executive officer, Johan Enslin, said while the group has reported an improving performance, trading conditions have remained particularly tough, with consumers in the group’s lower to middle income target market under continued financial pressure.
The high level of consumer indebtedness in the group’s target market is reflected in the credit application decline rate which increased from 38.4% in 2014 to 40.2% in 2015.

Lewis Group acquired the Beares brand together with 61 stores in November 2014. The chain was integrated into the group’s operations from mid December.

Enslin said Beares “offers exciting growth potential and will enable us to attract new customers in higher LSM markets where we currently have limited exposure”.

Following the purchase of the Beares stores, and the opening of a net 19 new stores, the group’s store base reached 716 at year end.
He said the gross profit margin was maintained at 36.6% despite “the aggressive discounting by competitors ahead of stores closures” in the last quarter of the 2014 calendar year.

On the outlook for the year ahead, Enslin said the retail trading and credit environment is unlikely to show any marked improvement in the short to medium term as the consumer economy remains weak and unemployment remains high.

The group plans to open 30 stores in the year ahead, including 20 Lewis and 10 Beares outlets.

“Beares is a scalable brand which offers good organic growth prospects. We are continuing to refine the merchandise offering for the chain’s higher LSM customers to maximise the potential growth of the brand,” he said.

“In this environment our focus will be on driving quality credit sales, containing costs and further improving collections rates. We believe the business is well positioned for further market share gains within the shifting competitive landscape,” said Enslin.

Issued by Tier 1 Investor Relations on behalf of Lewis Group
For further information kindly contact
Graeme Lillie, Tier 1 Investor Relations 082 468 1507