Lewis hikes dividend on resilient earnings but flags post-election jitters

Furniture retailer Lewis Group has delivered a “resilient” full-year performance and increased its dividend 21% despite a weak trading environment, but sounded a note of caution about political uncertainty and social instability in the aftermath of last week’s elections.

The group, which targets predominantly lower-income consumers through the Lewis, Beares and Best Home & Electric brands, and the upper-income market via United Furniture Outlets (UFO), increased merchandise sales 4.7% to R4.7bn in the 12 months to March.

Revenue increased 9.8% to R8.2bn and headline earnings per share were up 7.1% to 925c. Profit after tax rose to R436.4m from R411m a year ago.

The total dividend increased 21.1% to 500c a share, making it the third consecutive year that the group has returned more than 100% of earnings to shareholders through dividend payments and share buybacks, Lewis said.

The group said it had delivered a “resilient performance in a weak retail trading environment”, reporting continued strong credit sales, robust growth in the debtors book and record customer payment metrics.

Pressure on consumers’ disposable income from high energy, food, fuel and borrowing costs continued to constrain the group’s cash sales and hit the performance of UFO, the group’s cash retail brand.

Lewis said merchandise sales in the traditional retail segment increased 6.9%, with all the brands performing well. However, sales at UFO declined 12.6%. Comparable store sales across all brands rose 1.9%.

The strong credit sales growth trend continued, increasing 15.8%, though cash sales fell 11.8%. Credit sales have grown at a compound annual rate of 16.9% over the past three years and now account for 66.2% of total merchandise sales. The group has maintained its prudent credit-granting criteria, and the credit application decline rate increased to 35.1% from 34.7% in 2023.

Open stores

The group capitalised on opportunities to acquire well-located trading space to accelerate the expansion of its store base. A net 29 new stores were opened, including 10 new Bedzone stores and a net four new traditional stores outside SA. The total store base of 869 includes 138 stores outside SA.

Lewis plans to open 20 new stores across the traditional retail brands in the 2025 financial year.

The quality of the group’s debtors portfolio continued to improve, with the level of satisfactory paying customers increasing to a record high of 81.3%, from 80.4% in 2023. Collection rates stood at 79.7% compared with 80.8% a year ago.

During the year Lewis, valued at about R2.5bn on the JSE, repurchased 4.2-million shares at R170m. Since the start of the current share repurchase programme in 2017, it has bought back 35.7-million shares at R1.3bn.

The group doesn’t expect trading conditions to improve in the short to medium term as consumer spending and confidence remain depressed. “The risk of political uncertainty and social instability in the aftermath of the general elections poses a major threat to the trading environment,” it said.

Turbulent sea-freight markets, with operational constraints across SA ports and steep freight rate increases, are expected to remain challenging over the coming months and are likely to hamper economic growth, Lewis added.

“As consumer demand for credit is expected to be maintained, the group will continue to invest in the expansion of its debtors book, which is motivated by the proven history of effective credit practices and the quality of the debtors book,” Lewis said.

The company’s shares closed 3.18% higher at R47.06 on the JSE on Friday, taking the gain so far this year to 9.44%.

mackenziej@arena.africa