Lewis Group shares rocket on forecast of bumper earnings
SHARES in Lewis Group – which owns brands such as Lewis, Best Home and Electric, Beares and United Furniture Outlets – rocketed by more than 27 percent on the JSE yesterday after the retail company reported a favourable trading update for the year to the end of March, with earnings expected to surge by as much as 136 percent.
Lewis expects its headline earnings to increase by between 116 and 136 percent, up from R204.5 million reported last year.
The share price leapt to a yearhigh of R36.90 in the morning after the release of the favourable trading update, up from Tuesday’s closing price of R28.91. The share closed 17.54 percent higher at R33.98 on the JSE yesterday.
The group – which operates more than 805 stores, including 125 stores in neighbouring countries such as Eswatini, Namibia, Lesotho and Botswana – said it had achieved a strong operational performance during the year despite being knocked in the first quarter of the financial year by the lockdown trading restrictions.
“The good merchandise sales momentum reported for the nine months to December 2020 continued in the fourth quarter to March 2021, driven by robust growth in cash sales across all the group’s brands,” it said.
Its headline earnings per share (Heps) were expected to increase by between 127 and 147 percent, to between 590 cents and 643c a share, up from last year’s Heps of 260.2c.
Earnings per share (Eps) were expected to increase by between 138 percent and 158 percent, to between 553c and 600c, up from last year’s Eps of 232.1c.
Lewis also reported that the health of the debtors’ book continued to show an improvement during the period, with satisfactory paid accounts increasing for the period and collection rates improving steadily after the lockdown.
“Debtors’ costs reduced significantly compared to last year, when an additional Covid-19 debtors’ impairment provision of R189.5m was raised. These factors, together with continued tight expense management, have resulted in the group’s operating profit more than doubling over the prior year,” the group said.
The positive update comes after Lewis reported a 9.9 percent increase in its half-year earnings for the six months to the end of September, overcoming trading restrictions experienced in the first two months as a result of store closures to limit the spread of the pandemic.
Lewis expects to release its full-year results on May 27.