Lewis shows underwhelming trade update
AFTER months of shareholder disgruntlement and facing a fine by the National Credit Tribunal (NCT) for having breached the National Credit Act, Lewis Stores yesterday reported an underwhelming trading update for the third quarter and nine months to December.
The group’s revenue declined by 7.5 percent while its merchandise sales were 5.6 percent lower in the third quarter compared to the prior comparative period. Revenue for the nine months period declined by 4 percent and merchandise sales by 2 percent.
The company said credit sales were negatively impacted by the need to meet regulatory credit assessment requirements.
“Credit sales continued to be significantly impacted by the affordability assessments, which remain a major hurdle in the group’s lower income target market,” the group said.
Shareholder activist David Woollam last year demanded that Lewis chief executive Johan Enslin, chief financial officer Les Davies, non-executive chairman David Nurek and non-executive director Hilton Saven be declared delinquent in terms of the Companies Act, after accusing them of destroying shareholder value by engaging in greedy business practices. The High Court in Cape Town subsequently dismissed Woollam’s application.
However, the NCT in December ruled the company had transgressed the National Credit Act by selling loss of employment to self-employed consumers and disability cover as part of credit insurance to pensioners.
The tribunal interdicted the company from engaging in similar conduct in the future and ordered an independent audit to be conducted on all agreements entered into by Lewis Stores since 2007.
The company would be required to reimburse the premiums that were paid for this insurance. The National Credit Regulator had said it would return to the NCT to argue in favour of the imposition of a fine on Lewis.
Absa investment analyst Chris Gilmour said the new credit regulations had meant retailers were forced to reject many applicants, impacting on revenue and growth.