Credit ruling lifts Lewis sales
• Furniture retailer benefits from high court decision and UFO acquisition
The uptick in sales at furniture retailer Lewis is expected to continue into financial 2019 as the group benefits from a high court ruling in favour of credit retailers. /
The uptick in sales at furniture retailer Lewis, which gained momentum in the second half of the financial year, is expected to continue into financial 2019.
The group is increasing the footprint of recently acquired upmarket furniture chain UFO and is also benefiting from a recent high court ruling in favour of credit retailers.
InMarch, the court ruled that National Credit Act regulations requiring the presentation of bank statements, payslips and financial statements before credit can be extended discriminated against consumers who were informally employed or self-employed and those without bank accounts.
The regulation, which was introduced in 2015, combined with tough economic conditions represented a major setback to credit retailers. Lewis said the court’s favourable ruling will benefit the group’s credit sales.
“Prospective creditworthy self-employed and informally employed customers who were not able to supply payslips or bank statements are no longer required to provide this level of documentary proof of income,” said Lewis CEO Johan Enslin.
He said the group would provide credit to these customers in a “responsible manner”.
PROFIT DRIVE
The acquisition of UFO, which was included for only two months of the financial year, is part of the group’s strategy to diversify across market segments and retail channels.
UFO is a cash retailer of luxury household furniture to the higher-income market, with its main stores in Gauteng.
Management said the acquisition would allow Lewis to diversify its target market and access higher-income customers while increasing its cash-to-credit sales mix.
The group’s low-income market has been hit hard by years of low economic growth, constrained employment and weak consumer confidence.
On Wednesday, Lewis reported a 24.3% drop in headline earnings for the 12 months to end-March 2018.
Despite the drop in earnings to 302.6c, the retail group maintained its final dividend at 100c a share for a full-year payout of 200c a share.
Reduced income from finance charges and initiation fees, as well as a decline in revenue from insurance and “ancillary services” countered the benefits of an increase in merchandise sales. The group’s generous dividend has been maintained, despite financing the UFO acquisition and the repurchase of 5.4-million shares as well as the repayment of R1.5bn in debt.
Management said the group remained highly cash generative. The shares were repurchased at an average price of R30.24 per share.
The share traded at below R30 between mid-September 2017 and late January 2018. Under the current mandate the group is able to repurchase a further 2.3-million shares.
Since the end-March yearend, Lewis has launched a home shopping market, which is part of its strategy to attract customers in the higher-income brackets and to extend the group’s reach in urban areas.
THE GROUP’S GENEROUS DIVIDEND HAS BEEN MAINTAINED, DESPITE FINANCING THE UFO ACQUISITION