Lewis Group Ltd (JSE:LEW) Full Year 2025 Earnings Call Highlights: Strong Revenue Growth and ...
Release Date: May 29, 2025
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Revenue increased by 13.5% with merchandise sales growing by 9.2%.
Operating profit expanded by 66.9%, with an operating profit margin increase of 790 basis points to 22.7%.
EPS increased by more than 80%, and a final dividend of $0.50 was declared, bringing the total dividend for the year to $0.80.
The debtor's book displayed strong growth of 14.5%, with a record high satisfactory paying percentage of 83.5%.
The company successfully opened 33 new stores and revamped 170 stores, enhancing its retail footprint.
Operating costs exceeded the target range set at the beginning of the year.
The retail landscape remains challenging with no expected economic recovery or growth to support sales.
There is increased competition from companies like Pepcore entering the furniture business.
Borrowings increased by 279 million, although still within the board's risk appetite.
The share price growth did not keep pace with the growth in net asset value per share.
Warning! GuruFocus has detected 6 Warning Sign with JSE:LEW.
Q: How sustainable are the current gross profit margins, and how sensitive are they to changes in shipping rates? A: The upper end of our gross profit target range was set at 42%, which we exceeded. This was supported by strategic decisions to bring merchandise lines in earlier, allowing us to price accordingly and pass some cost pressures onto consumers. Our target range for this year remains at 40-42%. We aim to protect the gains made and continue to grow profits, maintaining an ROE above 15%. It's about finding the right balance to gain market share profitably. (Respondent: Unidentified_1)
Q: Which brands and provinces offer the biggest opportunities for store growth? A: At least 50% of our store growth will come from the specialty segment, specifically specialist bed set stores. We've increased our Real Bed store base from 16 to 26 stores. We are focused on finding quality retail space quickly to expand. The remainder of the stores will be opened under traditional brands, with opportunities across South Africa and BLNE countries. (Respondent: Unidentified_1)
Q: How do you view the competitive landscape, especially with Pepcore entering the furniture business? A: We are closely monitoring Pepcore's integration of 400 Shoprite stores. We remain satisfied with our market positioning and believe the addition of specialist bed stores will attract more cash customers. We continue to monitor competitors closely but are confident in our strategy and market position. (Respondent: Unidentified_1)
Q: Given your 2026 targets, do you expect to grow earnings this year? A: We are budgeting to grow earnings, albeit from a high base. Based on the first two months of this financial year, we believe we have the offering and business model to continue growing earnings, though not at the same rate as this year. We are not planning to go backwards. (Respondent: Unidentified_1)
Q: What is your current market share in South Africa, and how do you plan to grow it? A: It's difficult to quantify market share due to limited public information. However, we are satisfied with our growth, particularly in credit customers. Our credit contribution has shown significant market share gains, and extending credit remains the backbone of our business. (Respondent: Unidentified_1)
Q: Are you seeing any impact on paying customers due to weakening jobs data in Q1 2025? A: Currently, there is no strain in the debtor's book. We are satisfied with sales and collection performance for April and May. We are monitoring sectors like the motor and agricultural industries closely, but there is no additional strain on our customer base at this time. (Respondent: Unidentified_1)
Q: Do you anticipate cash generation to remain subdued due to further investment in the debtor's book? A: No, we expect the book to generate strong cash flow going forward. We are comfortable that we will not exceed our borrowing ceiling next year. (Respondent: Unidentified_3)
Q: What are your plans for store expansion and the impact on operating costs? A: We plan to open a minimum of 40 new stores, adding roughly 4% to the store base. We aim to open these stores early in the financial year. There will be some pressure on operating costs due to store expansion, but we are focused on maintaining expense controls. (Respondent: Unidentified_1)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
This article first appeared on GuruFocus.
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