JOHANNESBURG - Lewis Group said yesterday that it had set its sights on a strong sales performance during the festive period.
This after its profits for the six months ended September declined from R173million to R144m on the back of the lower- to middle-income market that came under spending pressure in the period.
Lewis chief executive Johan Enslin said the company’s credit sales continued to be restricted by the National Credit Regulator’s affordability assessment regulations. “Our core lower- to middle-income customer base continues to be impacted by increasing living costs, high unemployment and limited prospects in the current low-growth environment in the country.
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“The important festive trading season will be supported by strong promotional activity and new merchandise ranges across our three brands,” Enslin said.
The group’s merchandise sales increased 5percent, buoyed by new merchandise ranges and increased promotional activity across the company’s three trading brands: Lewis, Beares and Best Home and Electric.
The group’s gross profit margin strengthened by 40 basis points to 40.9percent, with the group saying that the margin benefited from more competitive pricing on locally sourced product and margin expansion in the furniture categories.
The company’s debtor costs declined 11.5percent, while collection rates improved from 74.6percent in the first half of the 2017 financial year to 76.2percent in the current period.
The company said, as at the end of September, it traded out of 744 stores across its three retail brands, following the net closure of 17 stores during the period.
The group said its 110 stores outside South Africa accounted for 15percent of its total store base and contributed 24percent of merchandise sales.
The group last month announced the acquisition of the luxury household furniture retailer United Furniture Outlets (UFO) for R320m, subject to competition approval.
UFO is a cash retailer targeting the higher-income market and has a footprint of 30 stores. Enslin said following the acquisition of UFO, the group was well positioned to service customers across all market segments.
“The acquisition of UFO aligns with our strategy of diversifying and gaining access to higher income customers and improving our cash-to-credit sales mix. We believe the business is scalable with the potential to expand its footprint across southern Africa.”
The UFO acquisition marked the second coup for Lewis in less than two years. In March last year, the group completed the acquisition of a portfolio of 57 Ellerines and Beares stores in four countries, expanding its store presence outside of South Africa to more than 100. The transaction was valued at R250m.
Lewis shares rose 6.32percent to close at R28.45 on the JSE yesterday.