Furniture retailer Lewis will ramp up its marketing to take advantage of the festive season.
CEO Johan Enslin said the festive trading season would be supported by strong promotional activity and new merchandise ranges across its brands — Lewis, Beares and Best Home and Electric.
Marketing spend over the six months to September increased 9% and Enslin said the benefit of the marketing strategies was evident in the top-line performance. "We’ve got some strong marketing plans, which will be executed during this period to put us right in the face of the consumer to show the value that is on offer.
We believe that will position us to gain market share," he said. Merchandise sales increased 5%, supported by marketing and promotional costs, which grew to R123m from R112m in the comparative period.
Enslin said an aggressive marketing strategy was motivated by the fact that the actual pool of Lewis customers was not growing in SA.
Lewis has closed 36 stores in rural areas in the past 12 months as a direct result of affordability regulations. Enslin said that before the affordability regulations came into play, more than 8% of the active customer base was self-employed customers and that number had now been reduced to about 4%.
"We must not lose sight of the fact that it hasn’t been in play for a full three years yet, and some of the customers that still form part of the 4% will still come up to settle their accounts but we will most probably not be in a position to reserve those customers," he said.
Lewis’s headline earnings for the six months to September declined to R144m from R173m, with headline earnings per share 15.8% lower at 163.9c.
Credit applications declined 37.4% and revenue dropped to R2.65bn from R2.74bn in the previous period. The decline was mainly as a result of lower credit sales and changes to the insurance offering in prior periods, which has limited annuity income.
Vele Asset Managers equity analyst Matthew Zunckel said Lewis’s other revenues were under pressure as expected, but this was having a material impact on profitability, as those other revenues were typically higher margin.