LEWIS, which sells furniture, electrical appliances and home electronics in southern Africa, wowed the market yesterday after reporting a 12.7 percent increase in merchandise sales in a tough environment to December 31, 2021.
By 11.50am its shares were up 2.35 percent at R48.
Lewis said in a trading update that the sales growth was in spite of ongoing pressure on consumer spending and the further tightening of the domestic economy in recent months, while the second and third quarters of the group’s financial year were impacted by the civil unrest in KwaZulu-Natal.
The prior comparative period included the Covid-19 hard lockdown in South Africa when all the group’s stores were closed for at least six weeks.
Piet Viljoen, executive director and portfolio manager at Counterpoint Asset Management, said in a tweet (@pietviljoen) yesterday: “Small-cap Lewis Stores delivers one of the best retail trading updates so far. On a P/E of less than 7. Yes, that’s right - 7. And it has the distinct advantage of not having a megalomaniac CEO that buys offshore crap at ridiculous prices.”
fintastico (@fintasticdata) tweeted: “Ou LEW is making money ekse! Another perfect Piotroski score... green is gold! With a Market Cap of 2.9 billion and earnings of 0.4 billion, we have a bargain 7x p/e ratio. Intrinsically, the Market Value could be 16 billion.”
Cash sales grew by 9.4 percent and credit sales recorded an “encouraging” 16 percent increase. Comparable stores grew sales by 10.3 percent for the nine months.
For the third quarter to December, Lewis said it delivered sales growth of 3.6 percent supported by robust Black Friday trading. When compared to the same period ended December 2019, sales grew by 20.7 percent.
Cash sales for the quarter grew by 0.5 percent, while credit sales increased by 6.6 percent.
Other revenue, consisting of effective interest income, insurance revenue and ancillary services income, continues to be impacted by the low interest rate environment and increased by 1.3 percent for the nine months.
Total revenue, comprising merchandise sales and other revenue, increased by 8 percent for the nine months.
The improvement in the quality of the debtors’ book reported at the interim stage had continued, with collection rates strengthening to 79.7 percent for the third quarter from 75.6 percent in the third quarter 2020, and 79 percent for the nine months from 69.5 percent in the comparative quarter a year ago.
Debtors’ costs for the quarter consequently reduced by 6.3 percent, contributing to an improvement of 20.5 percent for the nine months.
Lewis gave an update on its civil unrest insurance claim, saying as reported in the interim results announcement on November 24, the group’s South African Special Risks Insurance Association claim arising out of the civil unrest in July 2021 came to R78.8 million.
By September 30, R42.5m of the claim had been recognised in revenue. A total of R68.6m of the claim had been received by December.
Meanwhile, three of the group’s 57 stores damaged in the civil unrest remained closed.
Lewis is the latest retailer to issue an upbeat trading statement. Pepkor yesterday issued a subdued trading statement with revenue for the three months to December 31 rising 1.3 percent to R22.8 billion, while Shoprite said yesterday its sales increased by 10 percent in the six months to January 2 to R91.1bn.
Clicks, Mr Price, TFG and Truworths issued positive trading statements this month. However, Woolworths last week flagged that its earnings – for the 26 weeks to end December 26 – were expected to tumble by 30 to 40 percent, with its sales dented by the prolonged lockdowns in Australia and the civil unrest that rocked South Africa in July last year.