Furniture group Lewis expects earnings to be as much as 55% higher at the halfway stage after a strong trading and operational performance from its traditional retail brands.
Headline earnings per share (HEPS) for the six months to end-September are expected to be 45%-55% higher at 515c-551c, it said in a trading statement on Wednesday.
Earnings per share (EPS) are expected to rise by a similar margin.
The higher earnings reflected a strong trading and operational performance from the traditional retail brands of Lewis, Best Home and Electric and Beares, with continued strong credit sales and robust growth in the debtors book, the group said.
The performance was supported by the growth in other revenue, which continued to benefit from strong credit sales growth in recent years.
Gross margin had remained stable and within management’s target range despite turbulent sea freight markets, it said.
Operating costs were contained within management’s target range while the growth in insurance service expenses was closely aligned to insurance revenue growth.
Collections have been maintained at near record levels and the quality of the group’s debtors portfolio continued to improve.
“These factors have contributed to improved profitability and headline earnings for the period are expected to be between 35% and 45% higher than the R203.9m reported for the prior corresponding period,” it said.
Lewis will publish its interim results on November 21.
Business Day reported in July that the group was focused on reversing the fortunes of its underperforming high-end furniture business, United Furniture Outlets (UFO).
The group in its 2024 annual report said it was putting special focus on UFO to unlock value in that business, which reported a 12.6% reduction in sales in the year to end-March.
“Addressing the underperformance of UFO remains a management priority. We are committed to the turnaround in the business as we believe UFO has a strategic role in the group, targeting cash sales to higher income customers than the traditional retail brands,” CEO Johan Enslin said in his letter to shareholders.
“Ongoing strict cost management, sourcing new exclusive merchandise ranges and enhanced online and social media marketing strategies are aimed at driving a sustainable turnaround in performance.”
UFO is a cash retailer of luxury household furniture with a retail footprint of more than 50 stores. Lewis bought UFO, which targets the higher-income market, in 2017 for R320m.
With Noxolo Majavu
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