Lewis gets green light to buy Beares and Ellerines stores

Retail group, Lewis, has obtained approval from regulatory and competition authorities for its R250m purchase of Ellerines and Beares stores announced late last year, expanding its store footprint outside SA to more than 100.

The approval for 21 stores in Namibia, 20 in Botswana, 10 in Lesotho, and six in Swaziland now brings the group’s stores outside SA, which will operate under the Lewis or Beares brands, to 120.

Lewis CEO, Johan Enslin, said on Wednesday the new stores would give the group access to higher-income customers, as it traditionally targeted those in the lower-income segment.

‘As more than 75% of the stores acquired in this transaction will trade under the Beares brand, this will enable the group to attract customers in higher-income groups,’ he said.

The shift to customers in a higher income bracket comes at a crucial time for the group.

In a January trading update, Lewis said affordability assessment regulations had affected trading significantly, resulting in revenue rising just 1.1% in the three months to the end of December, compared with the same period the previous year.

The new regulations spearheaded by the national credit regulator that came into effect in September, now require that customers applying for credit present proof of income in the form of the three latest monthly payslips or bank statements.

Lewis said at the time this had proved to be challenging for its traditional lower-to middle-income target market.

‘Management does expect the acquisition to make a meaningful contribution to the group in terms of revenue and profitability,’ said Mr Enslin. ‘We are not aware of any losses brought about by actions of the National Credit Regulator,’ he said.

The stores in Lesotho and Botswana were absorbed into the group in the past two months, making the cut-off period for Lewis’s 2016 financial year, which is due to be reported on in May. The Swaziland stores are expected to be absorbed early next month, while the Namibian stores would follow in May.

‘Management anticipates that the 57 stores will make a meaningful contribution to profitability in the medium term, but cannot disclose specific revenue or profit forecasts for these stores,’ Mr Enslin said. (Bus. Day, 24 March 2016)

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