January 24, 2011
Furniture retailer Lewis Group is benefiting from improved trading conditions and debtor collections, despite continued high levels of unemployment.
The group said on Friday in a trading update that sales continued to improve since its interim reporting period, with merchandise sales for the quarter to December increasing an annual 13 percent. Merchandise sales for the nine months to December rose 12 percent.
The group’s retail brands are Lewis, Best Home and Electric, and My Home.
Debtor collections for the quarter to December increased 14.7 percent, with debtor costs for the nine months to December reflecting a satisfactory improvement, the company said.
Kagiso Asset Management head of research Abdul Davids said Lewis’s numbers were in line with expectations as the firm had been more resilient than JD Group.
Lewis has maintained that its key headwind was unemployment given its exposure to lower-income earners. Despite heavy job losses in this category it has performed well.
However, the impact of job losses might still have a lag effect on Lewis, Davids said.
Competitor JD Group has greater exposure to credit and in the last 18 months has written off a lot of bad debt, which impacted earnings. But its performance this year would improve due to the non-recurring bad debt, Davids said.
“If you include operational growth and expansion JD Group’s earnings should improve substantially.”
JD Group in November reported a 3 percent increase in sales in the year to August, but said there had been significant improvement in the second half of the financial year with sales up 6.7 percent.
In November Lewis reported that in the six months to September merchandise sales grew by 11.2 percent.
On Friday Lewis shares closed 3.8 percent higher at R75.20, while JD Group rose 2.4 percent to close at R52.84.