Lewis' third-quarter revenue declines in tough conditions

Picture: Financial Mail

Lewis Stores has 444 stores of varying sizes in SA and a further 47 in Botswana, Swaziland, Namibia and Lesotho. The Lewis group acquired 61 Beares stores in 2014 to reach the higher-income market in which it had little coverage. It now has 67 Beares stores.

Monarch insurance, a subsidiary of the Lewis Group that services its credit sales, was responsible for up to 67% of total sales for the group in 2015.

The drop in revenue has continued from the figure reported for the six months to end-September 2016. This decline in performance follows an unfavourable judgment by the National Consumer Tribunal against Lewis Stores and Monarch Insurance on September 14.

The judgment followed complaints against the subsidiaries by the National Credit Regulator, in which the regulator claimed that Lewis violated the National Credit Act by offering loss-of-employment insurance to pensioners and self-employed consumers. This has led to the regulator instituting affordability assessment regulations at least until Lewis's appeal against the judgment is heard.

These conditions have resulted in a big drop in Lewis’s credit sales, while the continuing drought has constrained business in rural areas.

Lewis’ revenue fell 7.5% for the third quarter to December — a drop in sales of 5.6% — compared with the third quarter a year earlier. Over the nine-month period, revenue fell 4% and sales 2%.

Lewis also reported a 6% increase in debtor costs in the nine months to December, though it was better than the 7.3% in the six months to September.

At 3.07pm, Lewis’s share price was down 1.27% to R36.66, giving the company an approximate value of R3.595bn.