21 Jun Lewis cuts credit but sales grow
The Lewis furniture group turned down an increasing number of credit applications to buy its furniture as consumers continued to buckle under pressure, its results statement for the year ended March said on Wednesday.
It rejected 40 of every 100 applications for credit to acquire furniture during the reporting period, slightly more than the previous year’s 38% rejection rate. Lewis had more than 690,000 credit customers in the period, acquiring its furniture from more than 700 stores, starting at Best Home & Electric, at the lowest-income category, to Beares Furniture, aimed at wealthier customers.
Tighter debt-collection efforts helped improve Lewis’ ‘satisfactory’ paid customers to 68.7% and non-performing customers reduced to 15.5% in the period.
Its rejection of credit applications was a result of the financial difficulties experienced by consumers.
Credit sales as a percentage of total sales declined from 72% to 69% in the reporting period, mainly due to the incorporation of the Beares chain, which has a higher cash-sales component.
Publishing its interim earnings in March, competitor JD Group, the operator of the Russells and Joshua Doore stores, also said furniture buyers’ reduced disposable incomes and higher indebtedness had reduced their expenditure on furniture, inhibiting market growth.
Despite the high number of customer rejections, Lewis still managed to raise sales of merchandise 18% in the second half of the period, compared to a 3.5% decline in the first half. For that, the company had to rely on higher marketing activity and promotional specials to win market share away from competitors.
Lewis also acquired the Beares brand — bringing 61 stores into its fold — from Ellerines Holdings, which went under business rescue last year preceding the collapse of owner African Bank, the micro-lender that is still the subject of business rescue.
‘Beares offers exciting growth potential and will enable (us) to attract new customers in higher LSM markets,’ Lewis CEO Johan Enslin said.
Lewis also acquired 12 My Home stores.
The tough times have not dampened Lewis’ view of the future. The group will spend R100m this year — up from R87m last year — increasing capacity to service its customers.
The money will be used to increase the fleet of delivery vehicles to service new store openings, said group spokesman Graeme Lillie.
Lewis also planned to open 26 new stores this year, he said. (Bus. Day, 28 May 2015)