SA's largest furniture chain Lewis says it is already seeing of deteriorating retail trading conditions, reporting on Thursday that cash sales fell in its six months to end-September, as rampant inflation and a weak labour market puts pressure on its customer's wallets.
The JSE-listed furniture and appliance group reported on Thursday that merchandise sales rose 4.3% to R2.1 billion to end-September, but added that “trading conditions weakened significantly in the second quarter of the financial year”.
While credit sales grew by 16.4% for its half-year, its cash sales declined by 8.1% “reflecting the pressure on consumer disposable income.”.
The group said it increased headline earnings by 4.4% to R236 million, while headline earnings per share rose 19.2% to 393c “reflecting the positive leverage effect from the group’s aggressive share repurchase programme”. The group kept its interim dividend at 195c per share.
CEO Johan Enslin said a statement that escalating food, fuel and electricity costs, together with rising interest rates and record unemployment had negatively affected consumer spending and confidence.
“Our traditional retail brands of Lewis, Beares and Best Home & Electric have proven more resilient in the current environment, supported by increased credit sales,” he said.
But he said cash sales had been hit particularly hard, especially at its UFO stores, which focus on higher-income consumers. UFO was also particularly hit by rail woes, given it imports about two thirds of its stock.
In addition to the global shortage of shipping containers and severe port congestion, the local supply chain was further impacted by the floods in KwaZulu-Natal in April, which damaged the critical rail link between the Durban port and Gauteng. This necessitated containers being transported from the Durban port by road freight at significantly higher costs.
In morning trade on Thursday shares of Lewis were down 0.89% at R49, but have still risen almost 3% so far in 2022. Click here for more details on the shares of Lewis as well as for other info.