Johannesburg - Lewis Group shares fell the most in more than two years after South Africa’s credit regulator asked for a fine of R10 million to be imposed on the furniture seller for mis-selling products.
The referral relates to three cases of the sale of retrenchment cover to pensioners and self-employed consumers, or the sale of disability cover to pensioners under credit life insurance contracts.
The National Credit Regulator had referred Lewis and Monarch Insurance Company to the National Consumer Tribunal following an investigation into loss-of-employment cover sold to people who would not be able to claim the benefits, Lebogang Selibi, a spokeswoman for the watchdog, said on Thursday.
“We are requesting Lewis and Monarch to refund the pensioners and self-employed consumers and to do an audit in terms of how much to refund.”
“We are also asking the Tribunal to impose an administrative fine,” Salibi said.
Lewis, which generates about 70 percent of sales on credit, slumped 7.9 percent to R82.93 earlier in the day at the JSE, the steepest fall since May 2013 and the lowest level since April 29. That pared the stock’s gains this year to 12 percent, valuing the company at R8.1 billion. The shares closed lower 6.67 percent at R84.00.
“The directors and management of Lewis are committed to co-operating fully with the Tribunal to ensure satisfactory resolution of the case,” Lewis said in a statement.
“The group undertakes to keep investors updated on developments relating to the Tribunal’s investigations,” the group added.
Lewis and Monarch offer credit insurance to customers to cover their outstanding balances should they lose their jobs or become unable to work.
Beares acquisition
While Lewis is facing a tough time, it is making good on its acquisition of Beares, out of the failure of African Bank Investments Limited (Abil), as in May it announced plans to open 100 new Beares stores.
The group plans to spend R100m this year, including funds for 20 new Lewis stores and 10 Beares stores.
The Beares expansion is a bid by Lewis to gain market share and attract more well-heeled furniture shoppers to which it has limited access.
Lewis chief executive Johan Enslin said in May that the opening of the 10 Beares stores was to test the higher-end market. If successful, the retailer would expand the number of Beares stores to 200 within the next five to seven years, he added.
Lewis bought 61 Beares stores for R93.7m from Ellerine Holdings, the furniture division of Abil, which went bust in August last year.
Bloomberg