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.
THE UN HAS forecast that South Africa’s gross domestic product (GDP) will rebound less than 3 percent in 2021 due to a number of downside risks clouding Africa’s outlook.
In its World Economic Situation and Prospects as of mid-2021 yesterday, the UN said South Africa’s GDP was projected to expand by 2.8 per cent in 2021.
This is the lowest GDP forecast for South Africa this year after an upwards growth outlook of 3.8 percent by the SA Reserve Bank, 3.3 percent by the National Treasury, and 3 percent by the World Bank.
The UN report also warned that medium-term prospects were constrained by lack of fiscal space, chronic high unemployment and lingering power shortages as Eskom fails to resolve the energy crisis.
The report said the growth outlook in several sub-Saharan African countries remained fragile, with GDP forecast to contract by 0.7 percent in the region this year.
For the rest of Africa, the UN said GDP was forecast to contact by 0.2 percent as the vaccination progress is by far the slowest in the world at only 1.2 doses administered per 100 people.
It said for many countries, economic output was only projected to return to pre-pandemic levels in 2022 or 2023.
“Given the slow pace of vaccine roll-outs and new variants of the virus, new waves of infections could trigger new lockdowns and constrain the projected recovery in the near term,” it said.
“Inflationary pressures are rising in some countries due to higher food prices, but aggregate inflation is projected to remain moderate.”
Africa’s situation is completely the opposite of its global peers as the UN said the global economy was now projected to expand by 5.4 percent in 2021, an upward revision from 4.7 percent growth forecast in January.
The UN said growth would be led by robust rebound in China and the US amid rapid vaccinations and continued fiscal and monetary support measures. Manufacturing-dependent economies had fared better, but a quick rebound looks unlikely for tourism- and commodity-dependent economies.
UN chief economist Elliott Harris called for equitable global access to vaccines to address the severe and disproportionate impacts of the Covid19 pandemic.
“Vaccine inequity between countries and regions is posing a significant risk to an already uneven and fragile global recovery,” Harris said.