January 24, 2011
FURNITURE retailer Lewis said on Friday its merchandise sales for the third quarter ended December had increased 13%, as the company continued to benefit from its policy of working to “re-serve” customers.
Merchandise sales for the nine months to December last year were also strong, reflecting a cumulative increase of 12%.
“Lewis has done well to keep its customers by using its re-serve policy. This has given it an edge over its competitors such as JD Group and Ellerines,” Shanay Narsi, an equity analyst at BoE Private Clients, said.
Part of the re-serve policy sees Lewis granting credit at a centralised level but collecting credit payments at store level, which created strong personal relationships, Mr Narsi said.
JD Group collects credit payments at a centralised level.
But Mr Narsi admitted that even though Lewis was happier than JD Group had been recently to extend credit to customers, this could obviously be risky.
JD Group had written off a large amount of bad debts during the past couple of years, prompting it to act cautiously, he said.
Meanwhile, Lewis had continued to benefit from the lower-end retail markets, trading large quantities in rural areas.
Mr Narsi said Lewis had taken steps to keep workers, even when they worked fewer hours, on their credit books and also extended loan periods.
“These moves have not harmed Lewis. The sales growth figures suggest accelerated trading. This is a good update,” Mr Narsi said.
Lewis also said its debtor collections had continued for last year’s fourth quarter, “resulting in an increase of 14,7% in collection levels, with debtors’ costs for the nine months reflecting a satisfactory improvement”.
Lewis’s share price had increased 3,53% by 3pm on Friday, in 677 deals involving 333666 shares.
Credit retailers including Lewis, Truworths and Foschini have outdone major cash retailers in terms of sales performance in the latter half of last year.
Truworths group sales for the six months to December last year rose 15,3%, while its growth for stores open at least a year, or same-store growth, was 10,6%. Foschini’s sales grew 22,5%, while same-store growth was 17,2%.
Analysts such as Syd Vianello of Nedbank Capital are expecting major credit retailer Edgars to release impressive results sometime next month.
Lewis’s financial results for the year to March this year are expected to be released on or about May 23, the furniture retailer said.