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Lewis posts profit growth as bad debt costs stabilise – Business Day

November 9, 2010

FURNITURE retailer Lewis Group said yesterday that pretax profit rose 14% in the six months to September as sales increased and bad debt costs stabilised.

The company that operates 565 stores under the Lewis, Best Home and Electric brands, said pretax profit increased to R441,9m from R386,6m.

Furniture and appliance sales rose 11,1% with electronic goods sales up 11,7%.

Sales on credit rose to 71,7% from 68,5% of total sales.

“It’s a satisfactory result for us,” CEO Johan Enslin said. “We’ve had six very strong months on the collection side of things. Increasing debtor costs have slowed. Sales are really looking up.”

Many Lewis customers are public servants who have benefited from the recent generous wage increases.

The proportion of customers in the “satisfactory paid” category — those paying 70% or more of amounts due over the contract period — rose to 71,6% from 69,6% from a year earlier .

The company’s impairment provision, however, increased from 17,9% to 18,4% of net debtors over the period due to the higher capital investment in longer-term contracts.

The company, which builds in incentives to customers to borrow more as their existing loan terms come to an end, said 55% of all business generated during the period was with existing customers. “Targeted local store promotions that hone in on good- paying customers are the biggest weapons in our artillery,” Mr Enslin said.

Other issues that affect Lewis customers directly, such as food and fuel prices, are working in the company’s favour, he said.

However, unemployment remains the biggest concern for the company, which declined to predict a stronger Christmas than last year.

“We are optimistic about Christmas. We went out and sourced some really excellent value-for-money merchandise,” Mr Enslin said. “We’ve got the stock to make this festive season as strong as possible.”