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Like many of its peers, JSE-listed household furniture retailer Lewis Group is feeling the financial pinch, as merchandise sales for the nine months ending December 2022 increased by a muted 2%.
The group was impacted by widespread inflationary pressure, rising interest rates and record high unemployment, it said on Friday.
In a trading update informing investors on the group’s performance for the period, Lewis – which runs a largely credit business – said it has seen a drop in cash sales, as its customers rely even more on credit for purchases.
The third quarter to December – a period that tends to be a boom time for retailers as customers tend to spend more on festive deals and promotions – saw a 20.7% reduction in cash sales at Lewis and a 17.3% jump in credit sales.
The group further reported that sales in its cash retail brand UFO declined by 9.7%, a sign that consumers are having to pinch their pockets closed more than ever before.
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“Credit sales, which accounted for 58.3% [Dec 2021: 50.9%] of total sales, increased by 16.8% while cash sales declined by 13.5%, reflecting the mounting pressure on consumer disposable income,” Lewis said.
Strong repayments
Despite the decline in consumer buying power, signs are that consumers are at least still able to honour repayments for purchases when chopped up into smaller amounts, over a period of time.
According to the furniture retailer, which also sells appliances and homeware electronics, it has gained a “strong momentum in collection rates” since the publishing of its interim results in September.
For the third quarter, the collection rate came in at 82.7%, up from 79.7% in 2021, while for nine-month period the rate came in at 82%, up from 79.1% in the comparable 2021 period.
Total group revenue increased by 2.8% for the nine-month period, supported by other revenue – like interest income, insurance revenue and ancillary services income – which increased by 5.3%.
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The Lewis Group’s share price fell over 7% in early morning trade on Friday, as the market digested the update, however, it regained some lost ground, at just over 2% weaker in afternoon trade.
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