A Lewis store in Primrose in Johannesburg.

Johannesburg - Lewis Group, which had been probed for its practice of selling insurance to all customers, says trading in the four months to July shows improved sales.

In a statement to shareholders issued on Friday, CEO Johan Enslin, noted merchandise sales increased 15.5% for the period.

This, he says, was supported by the Beares brand which was included in the results for the first time. Lewis bought the brand from Ellerine, the furniture unit of failed lender African Bank, in November last year and said at the time it would add 10 new stores.

In addition to that boost, sales in Lewis and Best Home and Electric increased 6.3% for the period, said Enslin. The credit/cash sales mix was similar to the 69% level reported for the 2015 financial year.

Stripping out the R69 million Lewis will refund to customers who were sold insurance policies they could never use, revenue gained 7.7% in the four months, it says.

The National Credit Regulator alleged last month that the group’s subsidiaries Lewis Stores and Monarch Insurance had contravened the National Credit Act by selling the policies to certain customers. Since these consumers were not entitled to benefits provided under the policies, the regulator argued, Lewis and Monarch had sold such cover with the intent to defraud the consumers and referred the complaint to the National Consumer Tribunal.

Lewis has said an internal investigation going back to June 2007 had found a small percentage of pensioners and self-employed people were sold the policies in question through human error and in contravention to Lewis’ policies.

Debtor costs for the period increased by 12.5%, reflecting a further slowing in debtor cost growth from the 22% growth reported at year end, it says.

The furniture retailer, which is headquartered in Cape Town, expects the retail trading and credit environment to remain challenging as the consumer economy remains weak and unemployment remains high.

Unemployment is currently officially at 25%.