- Outlook remains muted on affordability of furniture purchases
- Retailer plans to change Ellerine stores to Beares brand
South African furniture retailer Lewis Group Ltd. expects stricter lending conditions imposed by regulators to remain a drag on purchases after a slide in first-half profit.
Changes by the National Credit Regulator in how customers are assessed before being allowed to buy and pay later “have had impact on merchandise sales during the last four months,” Chief Executive Officer Johan Enslin said by telephone on Monday. “Where it comes to people that are employed in the informal sector, there is still some more pain that will be taken in the months ahead,” as the changes include a requirement that customers provide three months’ proof of income.
Net income in the six months through September fell 13 percent to 298 million rand ($20.9 million), with customers in the mining and agricultural sectors being under particular pressure, Lewis said in a statement. The retailer maintained the interim dividend at 2.15 rand a share as a reflection of confidence in “medium-term prospects.”
The shares fell as much as 7.8 percent to 57 rand, the biggest drop since July 30, and traded at 59.52 rand as of 1:30 p.m. in Johannesburg. The stock has declined about 20 percent this year, reducing its market value to about 5.8 billion rand.
Lewis, based in Cape Town, said Monday it’s offered to buy 62 Ellerine and Beares stores in Botswana, Namibia, Swaziland and Lesotho for about 250 million rand, doubling the number of outlets it owns in those countries. The retailer plans to change most the Ellerine stores to trade under the Beares brand, Enslin said. It will gain the debtor books of the acquired stores and Enslin said he sees these making a profit in the next 18 to 24 months as the quality is “good and there are a lot of re-serviceable customers.”
Ellerine went out of business in August last year after parent company African Bank Investments Ltd. failed. Administrators have been winding down the operations, which once had more than 940 stores and employed 7,060 people.