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Mass-market retailer Lewis Group expects to report a rise of between 20 percent and 26 percent in normalised headline earnings this year, despite a slowing in the country’s furniture sales boom.

By Tom Robbins

Cape Town – Mass-market retailer Lewis Group expects to report a rise of between 20 percent and 26 percent in normalised headline earnings this year, despite a slowing in the country’s furniture sales boom.

Lewis Group gave the profit range for the year to March in a trading update yesterday.

In the previous year, normalised headline earnings rose 27.3 percent to R510 million, indicating that profits this year will be maintained or will slow down. The normalised headline earnings exclude accounting charges as a result of a donation of shares to staff.

Godwill Chahwahwa, an investment analyst at Coronation Fund Managers, said the credit retailer’s result was “a very good performance in an environment where we hear … that consumer demand in the credit furniture market is slowing”.

He said attention would focus on the retailer’s debtors book when the results came out later in the month, but he believed it was still performing well and a key contributor to the overall performance.

He expected sales growth of between 14 percent and 15 percent. This is in line with growth of 14.5 percent in the previous year.

Competitors Ellerine Holdings and JD Group have both said sales growth at credit chains had slowed to below 10 percent. Ellerine said sales rose 7 percent for the quarter to January, while JD Group said they gained 6 percent.

Lewis Group, with its core Lewis chain, has greater exposure to the mass market than Ellerine and JD Group, which also target middle-income customers who pay cash.

But Gryphon Asset Management chief investment officer Abri du Plessis said none of the three furniture retailers had problems with debtors books. He expected the furniture sector to continue doing fairly well, despite initial fears that these retailers were not prepared for the introduction of the National Credit Act in June.

Lewis Group expected headline earnings, including the accounting charge in the previous year, to rise between 36 percent and 42 percent.

Lewis Group shares lost 0.98 percent to R73 yesterday. The general retailers sector fell 0.14 percent.