Like many of its peers, JSE-listed household furniture retailer Lewis Group is feeling the financial pinch, as merchandise sales for the nine months to December increased by a muted 2%. They were impacted by widespread inflationary pressure, rising interest rates and record high unemployment, the group 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 more customers tend to spend more on festive deals and promotions – saw a 20.7% reduction in cash sales 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.
“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 on Friday.
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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 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 group’s share price tanked by over 7% in early morning trade on Friday, as the market digested the update, then hovered above the R42 mark.