Short time, retrenchments risk for Lewis growth

Chief executive, Johan Enslin, said the credit environment remained challenging over the period, with increasing unemployment, retrenchments and "short time" impacting disposable income levels.

This has resulted in higher debtor costs for the group, he said.

Earlier Lewis reported a 3.9% fall in headline earnings to 290.5 cents for the six months to end September 2009.

Net profit attributable to ordinary shareholders dipped 3.3% to R261,3 million and the company declared an interim dividend of 144c a share.

The company said the improving trend in revenue growth experienced in the latter stages of the 2009 financial year had continued, with revenue for the six-month period increasing by 7.9% to R1,9 billion and merchandise sales growing by 6.8% to R951 million.

Operating profit increased by 4.3% to R424,2 million.

Net profit attributable to ordinary shareholders dipped 3.3% to R261,3 million and the company declared an interim dividend of 144c a share.

"The 22% strengthening in the value of the rand during the period resulted in exchange losses on forward cover contracts of R30 million.

"This accounted for the 3.9% decline in headline earnings per share for the period," said Lewis.

Enslin noted that revenue growth had shown consistent improvement over the past 18 months, growing by 5.0%, 6.6% and 7.9% over the past three six-month reporting periods.

Furniture and appliance sales, which contribute 80% of group sales, increased by 7.8% for the six months, while sales of the more discretionary electronic merchandise grew by 2.8%.

Enslin said Lewis continued to differentiate its offering with exclusive ranges which offer value for money to consumers in the current tough environment, with several new furniture ranges being successfully introduced in recent months.

He said the financial stress on consumers had resulted in debtor costs increasing from 4.5% to 5.0% of net debtors in the tightening credit collections environment.

"The doubtful debt provision for the first half of the year has increased from 15.5% to 17.9%."

The flagship Lewis brand, accounting for 85% of merchandise sales, grew revenue by 7.9%.

Best Home and Electric lifted sales by 10.2% and Lifestyle Living by 0.8%.

The group opened five Lewis stores and three Best Home and Electric outlets in the past six months.

The small store model adopted by Lewis is proving successful and the five stores in this format are all performing ahead of expectations, it said.

Looking ahead, the group noted that it planned a further seven to ten stores for the second half, with four small format Lewis stores scheduled to be opened in November.

It further said that the festive season trading period would be strongly supported by merchandise and promotional campaigns to maximise sales opportunities.

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