Enslin joins a string of industry players raising an alarm on the surge in unsecured lending, which some say places SA on the slippery slope of a credit bubble risk.
Unsecured lending is the granting of credit without assets being provided as security, at higher borrowing rates.
It is a high margin business, which until recently was dominated by small lenders, however, bigger banking players are increasingly eager to grant credit facilities to highly indebted consumers.
"We see it as a concern - one that is a bit bigger than just the Lewis Group, we see it as a concern for everybody that extends credit out there," Enslin told I-Net Bridge/BusinessLIVE. He noted that debt consolidation products could also "cause a problem" going forward.
According to the national credit regulator (NCR) unsecured credit increased from just over R21 billion for September 2011 to just over R26 billion for December 2011, a quarter-on-quarter increase of 24.69%.
Earlier this week, the country's biggest micro lender, African Bank Investments Limited (ABIL, ABL) said experience had shown that wherever there was a rapid expansion of credit markets, heightened caution was required.
"Lending has moved away from mortgages and instalment credit to unsecured lending for a variety of reasons, not least of which is to improve margins and ultimately, risk-adjusted profitability. Customers are encouraged to migrate to unsecured credit for their additional financial needs.
"This is particularly evident in the growing number of higher income earners in this segment of the market who, even in a rapidly growing market, have almost doubled as a percentage of the unsecured market between 2008 and 2011," ABIL CEO Leon Kirkinis said.
Speaking on unsecured lending, Finance Minister Pravin Gordhan in April said that if the increase in SA's unsecured loans were loans meant for consumption and not investment by households and businesses, then the increase was "worrying".
He noted that investigations were underway regarding reports that most of the growth in unsecured lending was in the higher income groups.
If this was the case, Gordhan said, it meant that higher income groups were "taking chances" with their indebtedness levels and were going to "now stress themselves with higher levels of indebtedness both financially and emotionally speaking".
The country's fastest growing retail bank, Capitec (CPI) meanwhile, is unfazed by the exponential growth in unsecured lending, viewing it as a normalisation of a past skewing of the market, which benefited only a very small percentage of the population.
In response to the general concerns regarding the overall growth of the unsecured credit market, Capitec CEO Riaan Stassen noted in March that the objective of the new Credit Act in 2007 was to make credit more accessible to the broader population of SA.
On Wednesday, Lewis Group reported a 13% increase in headline earnings per share to 882.5 cents for the year to March.
Enslin said trading conditions became increasingly challenging during the year.
"Consumers felt the pressure of rising transport and utility costs, and the lower disposable income impacted both our sales and credit collections," he said.
Revenue for the period increased by 6.1% to R4.9 billion and merchandise sales rose 3.3% to R2.4 billion.
Sales in the flagship Lewis brand, which accounted for 83% of total sales, increased by 4%, while its Best Home and Electric division grew sales by 11%.
Furniture sales comprise 54% of total merchandise sales, and credit sales as a percentage of total sales were consistent with 2011 at 71.4%.
The group noted that debtor costs settled at 10.8% of net debtors in a tight collections environment.
Lewis Group, which listed in 2004, imports 20% of its furniture on a direct basis, out of countries like China, Malaysia and South America, while the balance gets sourced locally.
Looking ahead, the company's retail footprint will be increased by 20 to 25 stores in the new financial year.
"Our small format stores give us the opportunity to open more stores in urban areas, where previously we might have had to rent a 400 square meter store, we can now afford to open a 200 square meter store. We will also open in rural areas," Enslin said.
Lewis Group plans to grow its store base to 700 in the medium term.
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