November 21, 2024
Cape Town – Lewis Group delivered a strong trading and financial performance in a weak retail environment as operating profit increased by 54.1% to R477 million and the group’s operating margin expanded by 600 basis points from 14.2% to 20.2% for the six months to September 2024.
The furniture retail group increased headline earnings by 41.6% to R289 million with earnings per share up 53.0% and headline earnings per share growing 49.1%, reflecting the positive leverage effect from the group’s share repurchase programme.
The group has returned R1.3 billion to shareholders since the start of its buy-back programme in 2017, repurchasing 36.7 million shares at an average price of R35.96 per share, relative to yesterday’s closing price of R84.09.
The interim dividend was increased by 50% to 300 cents per share as the board showed its confidence in the group’s prospects.
CEO Johan Enslin said merchandise sales gained momentum over the six months increasing by 8.5% to R2.4 billion, supported by the demand for credit, exclusive merchandise offering and improving consumer confidence. Sales grew by 7.7% for the first quarter of the financial year and by 9.3% for the second quarter which included a robust trading performance for the month of September.
Enslin said the strong credit sales growth trend continued as credit sales increased by 16.9%. Cash sales declined by 6.7%. Credit sales accounted for 69.4% of total merchandise sales compared to 64.4% in the first half of the prior year.
The group’s total revenue, including merchandise sales and other revenue, increased by 13.6% to R4.4 billion.
The gross profit margin strengthened by 20 basis points to 40.9% despite the impact of challenging sea freight markets. Enslin said inventory levels were increased as the group invested in stock to mitigate the impact of shipping delays on imported merchandise and to ensure stock availability ahead of Black Friday and the festive season trading period.
The group’s debtors book grew by 16.9% as the quality of the book continued to improve. Satisfactory paying customers increased to a record level of 81.6% from 79.9% a year earlier and collection rates ended the half year at 79.5%.
The store footprint was expanded to 897 with the opening of 15 stores across the Lewis (6 stores), Best Home & Electric (6 stores), Beares (1 store) and Bedzone (2 stores) brands. The group increased its presence in the bedding base set market with the acquisition of Real Beds, a specialised bedding chain with 13 stores. After the end of the reporting period, the group acquired a further four stores in Botswana.
On the outlook for the remainder of the financial year, Enslin said that while consumer confidence is improving, “we expect the recovery in discretionary spending will be slow and consumers will remain under pressure in the short to medium-term”.
“In this environment we anticipate consumer demand for credit to remain high and we will continue to invest in the growth of our debtors book.”
Enslin added that appealing Black Friday and festive season promotions are planned across all brands, supported by new merchandise ranges, favourable stock availability and targeted marketing campaigns.
Ends
Issued by Tier 1 Investor Relations on behalf of Lewis Group
Enquiries Graeme Lillie Tier 1 Investor Relations 082 468 1507
