Lewis Group’s shares leap after surge in its earnings
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LEWIS Group’s shares leapt more than 15 percent on the JSE yesterday after the retail company – which owns the Lewis, Best Home and Electric, Beares and UFO brands – reported a surge in interim earnings, new store openings and declared an interim dividend in the face of Covid-19 challenges.
The group reported a 9.9 percent increase in headline earnings per share to 236 cents a share for the six months to end September, while operating profit increased by 13.6 percent to R276.8 million and revenue decreased by 1.6 percent to R3 billion.
Lewis increased its interim by 10.8 percent to 133c.
The group said it overcame severe trading restrictions in the first two months of the national Covid-19 lockdown. All its stores in South Africa were closed from March 27 and were reopened on June 1.
However, chief executive Johan Enslin said the group experienced strong customer demand following the reopening of the stores at the beginning of June.
“While sales growth was initially supported by pent-up demand and savings accumulated during lockdown, this momentum was maintained which contributed to sales increasing by 20.1 percent for the four months to September,” Enslin said.
Its cash sales for the four months increased by 46 percent, with credit sales growing by 1.5 percent.
However, Enslin said the group lost roughly R360m in merchandise dividend sales and R250m in customer account collections as a result of the lockdown.
“Owing to these trading conditions, merchandise sales for the six months were 4.9 percent R1.65bn,” he said.
Lewis expanded its gross profit margin by 20 basis points to 40.5 percent while the operating profit margin improved by 120 basis points to 9.1 percent during the period.
The retailer also opened a net 11 new stores, increasing the store footprint to 805, including 125 stores in neighbouring Namibia, Botswana, Eswatini and Lesotho.
Enslin said the group remained on track to open 20 new stores across its trading brands in the 2021 financial year.
The group’s debtor book performed satisfactorily during the period and the board believes that the impairment provisions are adequate to meet future bad debts.
“Collection rates lower declined at to 66.5 percent, owing to the slow collections during the initial stages of lockdown but recovered to average 73.2 percent for the second quarter,” he said.
He added that extensive merchandise and marketing promotions had been developed for the two biggest trading periods of the year, covering Black Friday and the festive season in December, which they believed was an opportunity for the group to gain market share.
Looking ahead, Enslin said trading conditions were expected to become more challenging into the 2021 calendar year, with customers in the group’s lower- to-middle income target market being vulnerable to the rising levels of unemployment.
Lewis shares closed 18.48 percent higher at R22.89 on the JSE yesterday.