May 23, 2011
JOHANNESBURG (Reuters) – South African furniture retailer Lewis plans to increase store numbers by a fifth in the next two to three years in a bet on recovery in Africa’s top economy.
But CEO John Elsin told Reuters expansion into fast-growing sub-Saharan Africa was on hold, highlighting the difficulty for credit retailers in areas with weak financial infrastructure.
“We believe we must saturate the local market,” he said in a telephone interview.
Lewis, which runs around 580 stores targeting the low end of the market, extends credit to customers who cannot pay up front.
“We have no plans to expand into Africa … there are no reliable credit bureaus operating in most parts of Africa.”
Cash retailers such as Massmart, currently the target of a takeover bid from Wal-Mart, have been ramping up their expansion into Africa while credit retailers such Lewis and JD Group have not been able to follow.
Lewis reported a 21 percent rise in diluted headline earnings per share in the year to end-March, to 772.2 cents, beating an estimate of 756.4 cents by eight analysts polled by Thomson Reuters.
Results were helped by the stronger rand, which drives down the price of imports, and by fewer customers defaulting on debts thanks to the improving economy.
“A highlight for me was the gross margin improvement, it seems they were able to source products a lot cheaper and that should be a function of the stronger rand,” said Danie Pretorius, an analyst at RMB Morgan Stanley.
Lewis lifted its dividend payout for the first time in two years, by 12 percent to 363 cents.
Shares in Lewis, which have dropped nearly 6 percent so far this year, were up 0.7 percent to 77.14 rand by 1029 GMT, outperforming a 1.6 percent fall in the All-share index