May 19, 2010
Furniture retailer Lewis Group lifted revenue by 8% to R4.1 billion in the year to March 2010 as the early signs of improving economic conditions started to benefit consumers, while improved margins increased the group’s profitability by 9%.
Earnings per share increased by 5.6% to 672.0 cents and the total dividend was maintained at 323 cents per share for the year.
Chief executive, Johan Enslin, said merchandise sales grew by 6.5% to R2.1 billion. “Sales of the higher margin furniture and appliance category increased by 8.5% as our merchandise strategy of sourcing exclusive and differentiated furniture ranges continued to benefit the group,” he said.
Merchandise sales in the flagship Lewis brand, which contributes 83% of total sales, increased by 7.7%. Best Home and Electric grew sales by 7.8% and sales in Lifestyle Living declined by 10.4%. Credit sales supported by merchandise initiatives and in-store promotions increased to 68.5% from 64.3% of total sales.
Enslin said the group’s gross margin improved from 31.3% to 34.9%, fully recovering the currency losses reported at the half year. Adjusting for currency losses, the net position improved from 31.9% to 33.4%.
“The group operating margin improved to 22.1% (2009: 21.9%) which has translated into a 9.0% uplift in operating profit to R907 million, once again reflecting the resilience of our business model.”
Debtor costs increased by 28% from 10.0% to 10.9% of net debtors. Enslin said while credit collections were slow in the first six months, the situation has improved since half year and debtor costs have stabilised. The year end impairment provision moved from 15.7% to 16.0%, improving on the level of 17.9% reflected at half year.
“Our credit application decline rate at 27.5% is in line with first half experience, although up on last year’s 25.4%. The group’s centralised credit granting process has been a core strength in this difficult credit environment,” he commented.
Ten Lewis and six Best Home and Electric branches were opened, bringing the store base to 548 at the end of March. A more aggressive store expansion programme will see the group open 40 to 45 new stores in the year ahead.
A new trading brand, My Home, targeting customers in the LSM 7 – 8 categories will be launched in June 2010.
Enslin said My Home will adopt the successful Lewis business model and use the group’s well established credit infrastructure. “We will focus on differentiating our merchandise by offering exclusive and innovative ranging to attract customers who would use in-store credit facilities. Thirteen Lifestyle Living stores will be converted to My Home stores”.
Discussing the outlook for the group, Enslin said while trading conditions are showing early signs of improvement, the environment will remain challenging as the country emerges from recession.
“Debtor costs appear to have peaked and should moderate in the year ahead as the credit collections environment continues to improve. However, job creation remains key to stimulating economic growth among the Lewis target market,” he added.
Ends
Issued by Tier 1 Investor Relations on behalf of Lewis Group
For further information kindly contact:
Graeme Lillie Tier 1 Investor Relations
