Lewis’ latest sales highlight consumer squeeze

SA’s furnisher retailer Lewis on Friday reported a modest increase in sales for the nine months to end-December, indicating the continued squeeze on consumers’ discretionary spending in the prevailing tough economic climate.

Merchandise sales were up 4% year on year in the review period, with same-store sales rising just 1.5%.

Lewis targets predominantly lower-income consumers through the Lewis, Beares and Best Home & Electric brands. It also owns United Furniture Outlets (UFO) that caters to the upper-income market.

Retail brands Lewis, Beares and Best Home & Electric, which offer purchases on credit, reported sales growth of 6.6%, though sales at the group’s cash retail brand UFO fell 14.5%.

Group credit sales rose 17.5%, accounting for 65.8% of total sales during the reporting period. However, group cash fell 14.4%, indicting the effects of higher fuel, electricity, food and borrowing costs on discretionary spending.

Comparable store sales of the group’s traditional brands were up 3.2% year on year.

Collection rates were stable at 80.7% compared with 82% in the same period a year earlier. Debtor costs rose 59.8% as the debtors’ book expanded.

For the three months ended December, merchandise sales rose 3.5%. Sales in the traditional retail business increased 5.7% while UFO sales dropped 14.8%.

Other revenue, consisting of effective interest income, ancillary services income and insurance revenue, benefited from the strong credit sales growth over the past two years, rising 18.5% in the third quarter and 15.2% in the nine months.