Lewis hunkers down and pushes up share price

JSE-LISTED Lewis Group’s share price jumped 16.67 percent after it released a positive trading update for the nine months to December, with merchandise sales increasing 7 percent.

The share closed 17.7 percent higher at R28.60 on the JSE yesterday.

The group said it performed well during the third quarter to the end of December, with merchandise sales up 9.8 percent during the quarter.

“Lewis Group delivered a satisfactory sales and collections performance in the third quarter to end-December despite the continued challenging trading and economic conditions, and ongoing adverse impact of the National Credit Act’s affordability assessment regulations,” the group said.

The group added that comparable stores sales grew 13.3 percent for the quarter and 9.8 percent for the nine months.

The group criticised the introduction of the act’s affordability regulations in 2016, which require customers to provide their three latest salary advices or bank statements when applying for credit.

The regulations resulted in the group reporting a 2 percent decline in merchandise sales for the year to the end of March 2017, while headline earnings per share dropped 35.6 percent.

The positive trading update shows the group’s revenue increase 0.7 percent for the quarter, showing an improvement on the decline of 3.2 percent recorded for the six months to September.

However, revenue for the nine months declined 1.7 percent mainly, the group said, as a result of a 9.6 percent reduction in other revenue.

“This decline in other revenue annuity streams is largely due to lower credit sales in prior years, compounded by the implementation of the prescribed maximum credit life insurance rates in August 2017. This trend of declining other revenue annuity streams is expected to continue,” the group said.

It said debtor costs benefited from a stronger collections performance and decreased by 11.2 percent for the nine months. This reflects an improving performance on the 6 percent increase in debtor costs reported to the end of March 2017.

The Lewis Group is a leading retailer of household furniture and electrical appliances. It incorporates three trading brands: Lewis, Beares, and Best Home and Electric.

Lewis is the country’s largest furniture chain, with 513 stores, while Beares, which has 125 stores, was acquired by the group in 2014.

Best Home and Electric, which was established in 2008, sells home appliances and furniture in 123 stores.