November 20, 2019 / 6:03 AM / 17 days ago

UPDATE 2-South African retailer Lewis profits rise on strong sales

* Lewis group reported 18.9% rise in HEPS

* Sales rose 6.4%

* Group focusing on online, luxury retail for growth (Adds CEO comments and share price)

JOHANNESBURG, Nov 20 (Reuters) - South African retailer Lewis Group Ltd reported a 6.1% rise in its half-year revenue on Wednesday, driven by strong sales growth in the first quarter.

The furniture and appliance retailer, which caters to middle- and low-income consumers, said its headline earnings per share for the six months ended September came in at 215 cents, up 18.9% from 180.8 cents last year.

Headline earnings is the main profit gauge in South Africa that strips out certain one-off items.

At 0835 GMT Lewis Group shares were up 6.82% at 32.56 rand.

The retail group has had to cope with a weak macroeconomic environment in South Africa, which experienced an economic slowdown in the second quarter.

“The group’s strategy of diversification across target markets and sales channels is expected to continue offering resilience in the constrained consumer spending climate,” the group said in a statement.

The retailer has been diversifying to access higher-income consumers and attract online shoppers.

The group’s merchandise sales grew 6.4% with credit sales up 8.1% and cash sales advanced 4.1%.

United Furniture Outlets (UFO), a luxury furniture retailer owned by the group, posted an 8.8% increase in its sales and an operating profit of 22.6 million rand ($1.53 million).

At the group’s traditional retail brands Lewis, Best Home and Electric, and Beares sales rose 3.7% and operating profit was 201.6 million rand.

INspire, the omni-channel home shopping retailer, was the only division to report a loss of 13.2 million rand. This retailer is not expected to break-even by the end of the 2019-20 financial year.

Lewis Group said the 18-month-old online platform is a key aspect of its short to medium term expansion plans.

“Our short term plans are now focused on establishing our omni-channel business INspire and also on expanding UFO,” Lewis chief executive Johan Enslin said.

“So as things stand today we trade successfully out of 39 UFO stores and we believe that we can build that store base to 70 stores and the plan is to complete that roll out within the next 3-4 years,” Enslin continued.

In 2017, Lewis acquired UFO to diversify its target market and access higher-income customers, while increasing the cash-to-credit sales mix.

The group operates 787 stores in total, with 121 stores in neighbouring countries Namibia, Botswana, Eswatini, and Lesotho.

($1 = 14.7674 rand)

Reporting By Naledi Mashishi, Editing by Sherry Jacob-Phillips and Jane Merriman

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