Johannesburg - Lewis Group, South Africa’s second-largest listed furniture retailer, said a slowing increase in debtor costs and the end of protracted strikes may reflect a stabilising credit environment and boost sales.
The rise in costs related to collecting money owed for sold goods slowed to 27 percent in the six months through September, compared with 30 percent in the first four of those months, the Cape Town-based company said in a statement today.
Lewis has also managed to collect more from customers that had fallen behind on repayments, chief executive Johan Enslin said by phone.
“The more stable labor environment is most definitely playing a big part in this,” Enslin said.
A five-month platinum miners strike ended in June, while a four-week metalworkers stoppage took place the following month.
Shoppers in Africa’s second-biggest economy have struggled to repay loans as unemployment remains above 25 percent and economic growth this year is set to be the slowest since a 2009 recession.
Lewis competitor Ellerine Holdings started voluntary rescue proceedings in August after parent African Bank Investments Ltd withdrew funding because of persistent losses.
Lewis net income fell 10 percent to 340.2 million rand in the six months through September, the company said.
Trading in August, September and October was particularly difficult because of discounting by Ellerine outlets ahead of store closures, Enslin said.
Lewis, which maintained its interim dividend at 2.15 rand a share, won’t further tighten its credit granting criteria, he said.
Ellerine Discounts
The shares rose 1.2 percent to 65.75 rand as of 4:11 pm in Johannesburg, paring their loss this year to 7.3 percent.
Larger competitor JD Group, which was shored up by parent Steinhoff International in March, is down 14 percent in 2014.
Ellerine “offered and are still offering discounts of up to 70 percent,” Enslin said.
More than 300 stores across the company’s brands are expected to close by the end of the month.
Lewis, which agreed to buy Ellerine’s Beares brand for 40 million rand, expects South Africa’s competition authority to give feedback on the deal this month and, if approved, the benefits will be seen from December, he said.
“We will be able to integrate Beares into our head office, into our supply and merchandise operations and we will be able to cut most of the current head office costs that exist,” Enslin said.
“We believe this brand has got the potential in the medium term to expand to something closer to 200 outlets” from 75 now. - Bloomberg News