New NCR rules, tough economy hit Lewis sales

Johannesburg - Trading conditions for the nine months ended December 31 2015 remained extremely challenging, furniture and appliance retailer Lewis Group [JSE:LEW] said in a trading update on Monday.

It said sales were affected by weak consumer demand, constrained employment, the drought in the agricultural sector and difficulties in the mining sector.

Lewis added that trading has also been significantly impacted by the implementation of the National Credit Regulator's affordability assessment regulations. These regulations require customers to present their three latest payslips or bank statements as part of the credit application process.

According to Lewis, this has been challenging for consumers in the group's lower- to middle-income target market and impacted the performance for the third quarter ended December 2015, with revenue rising by 1.1% and merchandise sales being in line with the prior year.

Revenue for the nine-month period grew by 5.4% and merchandise sales by 4.7%. The debt collection performance remains stable, the group said in a note to shareholders. Debtor costs for the nine months to end-December 2015 rose by 16.5% on the corresponding period. This was in line with the increase reported at the half-year to September 2015.

Following the announcement of the acquisition of 62 Beares and Ellerines stores outside South Africa in November 2015, Lewis said the 10 stores in Lesotho were "seamlessly incorporated" into the group during December. Applications have been filed with the competition authorities in Namibia, Botswana and Swaziland, and the group awaits competition approval.

READ: Consumer watchdog takes Lewis on over charges

Lewis pointed out that the financial information on which the latest trading update is based has not been reviewed or reported on by the group's independent auditor.

Last week Fin24 reported that Lewis denied any allegations of reckless lending, in a case where a gardener in George was charged a total of R17 955 for a R5 999 washing machine he bought on credit.

Lewis group CEO Johan Enslin told Fin24 in an emailed response that interest and all costs were charged in accordance with the National Credit Act (NCA) and that all processes required by the act and its related regulations were followed.

READ: Lewis hits back in R18k washing machine row

In July last year Fin24 reported that a mystery shopping experience by Summit Financial Wellbeing, a company which fights for consumer rights and lobbies for change in the financial services industry, had seemingly uncovered major breaches of the NCA by Lewis. The alleged breaches relate to interest charges when customers buy on credit.

In October last year Lewis indicated that it would refund a total of R67.1m to customers for the cost of loss of employment insurance, which had been mistakenly sold to them.

ALSO READ: R67m customer refund is not the end of Lewis challenge

By 11:34 on Monday, Lewis shares were changing hands at R45.48, up 1.11% from Friday's close.

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