JOHANNESBURG (Reuters) - South African furniture retailer Lewis Group said its full-year profit fell 26.5 percent as its lower-to-middle income customers continued to face a tough economic climate in Africa’s most advanced economy.
An all-time high in domestic unemployment levels reached during the period contributed to a 2 percent decline in sales in the last six months, the company said on Wednesday.
Lewis said headline earnings per share (HEPS) fell to 621.7 cents in the year to the end of March from 845.3 cents last year. Headline EPS is the main profit gauge in South Africa that strips out certain one-off items.
The company also had to pay 67.1 million rand ($4.30 million) to customers it had mistakenly sold loan insurance to last year following an investigation by South Africa’s credit regulator.
“Adverse economic conditions have constrained consumer spending and this has been compounded by the introduction of the National Credit Regulator’s affordability assessment regulations,” Lewis said in a statement.
The credit affordability assessment requires customers to provide their latest pay slips or bank statements before they can get credit, a major challenge for many of the company’s consumers who are self-employed.
“We are hopeful that the National credit regulator will actually reconsider these regulations,” Lewis Group CEO Johan Enslin told Reuters.
Aggressive discounting by competitors ahead of store closures also badly affected revenues, but the company is still hopeful that this will open the market for them.
“We do believe that the benefits of these store closures and the demise of Ellerines will flow through and will serve our business in the medium to long term,” Enslin said.
The company’s shares rose 3.7 percent to 49.99 rand by 0902 GMT.
($1 = 15.6045 rand)
Reporting by Zimasa Mpemnyama, editing by Louise Heavens