The JSE Lewis Group-listed home furnishings retailer’s share price rose 9.48% on Wednesday, hitting a new 52-week high and closing at R47.45 after posting strong performance for the six months ending September 30.
Lewis posted a 20.7% increase in its merchandise sales to R1.99 billion, taking advantage of high volumes of stock availability.
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The group’s provisional results show that credit sales grew by 24.4% and cash sales by 17.1%, and credit sales represented 50.6% (first half of 2021: 49.1%) of total merchandise sales. Comparable store sales increased 17.9%.
Read: Lewis and Pepkor soar to 52-week highs
However, the double-digit growth in sales compares to the Covid-affected interim period of its prior financial year. Its semi-annual comparative period (April-September 2020) reflected the impact of the total Covid-19 blockade, when all 681 SA stores were forced to close for at least six weeks.
Store, sales growth
Despite supply chain challenges during its last interim period, as well as the impact of the July civil unrest in KwaZulu-Natal and parts of Gauteng, Lewis still managed to open 10 new stores across all of its brands, increasing its presence. in stores at 817..
The retailer says its stores outside of SA, which represent 15.8% of the store base, grew 17.5% and accounted for 18.3% of the company’s sales.
“Strong merchandise sales growth and lower borrowing costs contributed to operating profit increasing by 23.3% to R341.2 million, with an operating profit margin improving from 16.8% to 17.1%, ”Lewis notes in his earnings statement.
The group’s overall earnings increased 24.5% to R226 million, and overall earnings per share (Heps) increased 39.7% to 330 cents.
Lewis says that this (increase in Heps) also reflected the positive leverage effect of the group’s aggressive share buyback program.
“The group repurchased 5.4 million shares at a cost of R194.5 million during the last six months. Since the start of the share buyback program in 2017, the group has bought back 22.7 million shares at an average price of R29.52 per share, ”he says.
Impact of the July riots
Lewis says 57 stores were damaged and looted in KwaZulu-Natal during the riots, yet he has managed to reopen 51. He plans to reopen the remaining six once the damage has been repaired.
“The groups [South African Special Risk Insurance Association] Sasria’s claim amounted to R79 million, with R43 million having been paid and recognized in the results up to the end of September. The insurance claim balance of R36 million is expected to be received before the end of the financial year, ”the retailer adds.
“We are continuing our strategy of increasing inventory levels to ensure adequate stock coverage to meet customer demand and to counter ongoing challenges in the supply chain,” says Lewis CEO Johan Enslin.
“Our good stock position is a competitive advantage heading into Black Friday and the holiday season,” he adds.
Lewis Group notes that its debtor book also continues to improve as collection rates strengthened to 78.7% (1H 2021: 66.5%). The percentage of accounts paid satisfactorily increased to a 14-year high and debtor costs decreased by 32.8%.
Enslin says that while the sales and collections momentum continued in October, management forecasts that business conditions will be increasingly challenging for the remainder of the financial year.
Read: Retailers Can Expect Increased Sales From This Year’s Black Friday
“High levels of unemployment, rising interest rates and the sensitivity of our main target market to higher fuel and food prices are expected to limit spending in the coming months,” he adds.
“This will be exacerbated by the widespread shedding of the electricity load that is disrupting trade and affecting sales. Covid-19 continues to pose a risk to business prospects. ”
Lewis Group declared an interim dividend of 195 cents per share, up 46.6% compared to its previous interim period.
Palesa Mofokeng is a Moneyweb intern.