Lewis share price feels pressure as goods sales drop

Published Feb 3, 2014

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Furniture retailer Lewis Group’s shares closed 5.59 percent lower at R59.62 on the JSE on Friday after dipping as much as 7.4 percent during the day.

The market’s reaction followed the company’s trading update at 5pm on Thursday, in which the furniture retailer blamed slow growth in retail sales on the labour instability last year. The unrest in labour sectors such as the mining and motor industry affected its ability to collect debt.

Lewis’s revenue for the nine months to December grew by 2.1 percent compared with 6.2 percent in the previous period, with merchandise sales declining by 2.3 percent, compared with a 4.8 percent increase the year before.

Debtors costs for the period increased by 30 percent, in line with the rise in debtors costs reported at half year, Lewis said. Revenue for the quarter to December declined by 1.5 percent, with merchandise sales down 6.3 percent.

Lewis’s competitor Ellerines is also in trouble and was on the verge of being sold by its owner, African Bank Investments Limited (Abil). However, the bank said last week that it planned to “fix” Ellerines, preferably with a retail partner.

The retailer had faced a difficult trading environment, which resulted in Abil taking a R4.6 billion impairment on the unprofitable Ellerines in October and risked another R800 million write-down this year, chief financial officer Nithia Nalliah said last week.

Abil has entered into partnership talks to conclude an appropriate, strategic relationship with a new retailer for Ellerines. This would be done as part of a three-year turnaround plan for the bank. Abil gained 5.42 percent to R10.70 on Friday. – Nompumelelo Magwaza.

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