Lewis Group furniture businesses generated a very strong 49.1% rise in headline earnings a share for the six months to September 30 after demand for credit, exclusive merchandise offerings, and improving consumer confidence drove sales.
The board’s confidence in the group prospects, despite the current generally weak consumer environment, was reflected by the 50% increase in the interim dividend to 300 cents a share.
Its share price slipped 2.8% to R81.73 yesterday afternoon on the JSE, but shareholder optimism about group prospects is also reflected in the fact that the share price has more than doubled from R39 per share 12 months ago.
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 Wednesday’s closing price of R84.09.
CEO Johan Enslin said merchandise sales gained momentum over the six months, increasing by 8.5% to R2.4bn.
The strong trading and financial performance was indicated by the 54.1% increase in operating profit to R477m, and the operating margin expanded by 600 basis points to 20.2% from 14.2% for the six months to September 2023.
Headline earnings increased by 41.6% to R289m.
Sales grew by 7.7% for the first quarter 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 had 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 R4.4bn.
Enslin said stock levels were increased 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 improved. Satisfactory paying customers increased to a level of 81.6% from 79.9% a year earlier, and collection rates ended at 79.5%.
Fifteen stores were opened, and the store footprint expanded to 897. There were 6 new Lewis stores, 6 new Best Home & Electric stores, 1 new Beares and 2 additional Bedzone stores.
The presence in the bedding base set market was increased with the acquisition of Real Beds, a 13-store specialised bedding chain. After the end of the reporting period, the group acquired another 4 stores in Botswana.
Enslin said while consumer confidence was improving, “we expect the recovery in discretionary spending will be slow and consumers will remain under pressure in the short to medium-term.”
He anticipated that consumer demand for credit would remain high and the group would continue to invest in the growth of its debtors book.
Enslin said appealing Black Friday and festive season promotions were planned across all brands, supported by new ranges, favourable stock availability and targeted marketing campaigns.