Johannesburg - Retailer Lewis Group yesterday completed the acquisition of a portfolio of 57 Ellerines and Beares stores in four southern African countries in a bid to expand its African footprint.
The move comes as the group struggles with a poor retail environment in South Africa as economic growth slows with stricter lending conditions imposed by regulators.
Yesterday it said it had expanded its presence outside of South Africa to 120 stores.
The group said regulatory and competition approvals had been received for the acquisition of “21 stores in Namibia, 20 in Botswana, 10 in Lesotho and six in Swaziland” for R250 million. Lewis Group purchased the Beares brand and 61 stores in South Africa in 2014 after parent company Ellerines Furnishers was placed under business rescue.
Since then the National Credit Regulator has tightened unsecured lending and buying goods on credit. The Beares chain has since been expanded to 84 stores in South Africa.
Lewis said it was one of the first local retailers to expand into neighbouring southern African countries in the late 1960s. Stores outside of South Africa now comprise 15 percent of the group’s store base.
Chief executive Johan Enslin said the addition of these Beares stores in southern Africa, which was announced in November 2015, would bring immediate benefits of scale.
“The acquisition of these stores will provide Lewis with access to new segments of the furniture retail market and also expand our existing customer base in each of these countries,” Enslin said.
“Lewis has operated in these four countries for more than 50 years, so has extensive experience in these markets and a thorough understanding of the trading environments.”
Read also: Lewis adds 57 stores outside SA
Poor outlook
Lewis faces a poor outlook for consumer spending in South Africa. In March, Statistics SA data showed retail sales growth at an annualised 3.1 percent in January from 4.1 percent in December on the back of weak consumer confidence, higher debt service costs, as well as fading disposable income as a result of high inflation. This was lower than the consensus forecast of 3.8 percent.
On a month-on-month basis, sales contracted 0.3 percent but rose by 3.7 percent in the three months to January, compared with the previous year.
Business Report in March reported that Nedbank had said consumer growth was likely to be subdued this year.
Read also: Lewis expands in Lesotho, Botswana
“The poor economic outlook and worries about job security will continue to weigh on consumer confidence. Household finances will also remain tight as debt service costs rise along with the anticipated increase in interest rates, while rising inflation and limited employment growth will erode disposable income.”
Tight standards
The bank said lending institutions would remain cautious by keeping lending standards tight, and these would limit consumers’ ability to spend and keep retail sales growth weak during the year.
Lewis’s stock has declined by about 33 percent since 2011 and closed trade at R48.24 yesterday, with a market value of about R4.73 billion.
In November, Lewis Group reported results for the six months to September, which reflected the deterioration in retail trading conditions since July. Headline earning slid by R44.5 million to R286.6m, with diluted headline earnings a share 12.8 percent lower at 321 cents.
BUSINESS REPORT AND ANA