Lewis to open 40-45 new stores this year

Reporting its financial results for the year ended March 2010, Lewis said it increased its store base to 548 following the opening of 10 Lewis and six Best Home and Electric branches up to March.

New brand name

The group said a new trading brand, My Home - targeting customers in the LSM 7-8 categories - would be launched in June 2010.

Lewis chief executive Johan Enslin said My Home would adopt the Lewis business model and would use the group's well-established credit infrastructure.

"We will focus on differentiating our merchandise by offering exclusive and innovative ranging to attract customers who would use in-store credit facilities.

"Thirteen Lifestyle Living stores will be converted to My Home stores," he said.

HEPS

The group reported headline earnings per share of 642.6 cents for the year ended March 31, 2010, from 630.5 cents previously.

Earnings per share increased 5.6% to 672 cents, from earlier.

Lewis lifted revenue by 8% to R4.1 billion in the year to March 2010 as the early signs of improving economic conditions started to benefit consumers, while improved margins increased the group's profitability by 9%, it said.

The total dividend has been maintained at 323 cents per share for the year, comprising an interim dividend of 144 cents and final dividend of 179 cents.

Sales

Enslin said merchandise sales grew by 6.5% to R2.1 billion.

"Sales of the higher margin furniture and appliance category increased by 8.5% as our merchandise strategy of sourcing exclusive and differentiated furniture ranges continued to benefit the group," he said.

Merchandise sales in the flagship Lewis brand, which contributes 83% of total sales, increased by 7.7%.

Best Home and Electric grew sales by 7.8% and sales in Lifestyle Living declined by 10.4%.

Credit sales supported by merchandise initiatives and in-store promotions increased to 68.5% from 64.3% of total sales.

Enslin said the group's gross margin improved from 31.3% to 34.9%, fully recovering the currency losses reported at the half year. Adjusting for currency losses, the net position improved from 31.9% to 33.4%.

"The group operating margin improved to 22.1%, from 21.9% in 2009 which translated into a 9% uplift in operating profit to 907 million rand, once again reflecting the resilience of our business model," the chief executive said.

Debtor costs increased by 28% from 10% to 10.9% of net debtors.

Stabilising

Enslin said that while credit collections were slow in the first six months, the situation had improved since half year and debtor costs had stabilised.

The year-end impairment provision moved from 15.7% to 16%, improving on the level of 17.9% reflected at half year.

"Our credit application decline rate at 27.5% is in line with first half experience, although up on last year's 25.4%.

"The group's centralised credit granting process has been a core strength in this difficult credit environment," he commented.

Conditions still challenging

Looking ahead, Enslin noted that while trading conditions revealed early signs of improvement, the environment would remain challenging as the country emerged from recession.

"Debtor costs appear to have peaked and should moderate in the year ahead as the credit collections environment continues to improve.

"However, job creation remains key to stimulating economic growth among the Lewis target market," he concluded.