Lewis Group Ltd., a South African furniture and electrical-goods retailer, posted a drop in full-year profit as prolonged mining-industry strikes caused gross domestic product to shrink in the first months of 2014.
Net income in the year through March fell 7.6 percent to 842.2 million rand ($80 million), with merchandise sales decreasing 2.5 percent to 2.41 billion rand, the Cape Town-based company said. Debtor costs as a percentage of net debtors rose to 11.6 percent from 9.4 percent. The impairment provision climbed to 18.6 percent of debtors from 17.4 percent.
South Africa’s economy contracted in the first quarter of 2014, the first decline since a 2009 recession, with mining plunging the most in almost 47 years during the longest industry walkout in the nation’s history. An 18-week strike over pay by more than 70,000 workers has shut mines owned by Anglo American Platinum Ltd., Impala Platinum Holdings Ltd. and Lonmin Plc.
The strike “has had, and it is still is having, a very significant impact on all our stores in the platinum belt, and unfortunately it’s not only limited to that area” of North West province, Chief Executive Officer Johan Enslin said by phone today. “A lot of the money earned in the platinum belt actually ends up in the Eastern Cape, so we have also seen a negative impact on our stores in that province.”
Lewis fell as much as 2.8 percent to 60.75 rand, the lowest intraday price since May 8, and was trading down 0.6 percent at 62 rand as of 11:27 a.m. in Johannesburg. The stock has declined 13 percent this year, valuing the company at 6.08 billion rand.
The miners’ walkout has hurt demand across South Africa’s consumer industry. Food and liquor retailer Spar Group Ltd. reported slowing profit growth in the six months ended March, saying the strikes have “reduced disposable income” in some rural areas, holding back revenue and prompting discounting.
“The fridge and all the food cupboards will be really empty at this point in time” for the strikers, Enslin said today. “The guys will basically be behind on all their commitments, and it will take time” for household incomes to recover.