Lewis revenue up after Christmas buying spree

FURNITURE retailer Lewis Group continues to earn its solid stripes as it released a trading update yesterday saying revenue for the final quarter of last year rose 7,9percent, the same figure as growth for the nine months ended December.

December was particularly encouraging, with merchandise sales up 11,7percent. At the interim reporting period, growth was up 8percent.

Most of the food and clothing retailers have posted increased sales, but these have been below analysts' expectations.

BoE retail analyst Shanay Narsi said the Lewis Group had strong sales growth and a stable debtors' performance.

"It looks as if merchandise sales volumes are improving and taking up the slack from lower inflation and financial service yields."

Lewis' target market is less sensitive to interest rates, though more exposed to job losses. The company has said repeatedly it has not seen a big up-tick in their unemployment claims.

The group's customer has a debt to disposable income ratio of 35percent, far lower than the South African average. About 70percent of their account base don't have accounts elsewhere. "They have a loyal base," said Narsi.

The group does not use a call centre and incentivises the staff to make sales, and collect outstanding amounts.

"They're focused on selling merchandise and collecting the debt associated with it."

Narsi cautions that the company is not writing off some of the poor-paying customers as readily as other groups. The company rationale is that some customers are making payments, though paying less at a time.

"This update is testament to a very good company focused on a single brand" Narsi said.