Lewis lifts profit 21% as credit demand and margins strengthen

Key topics:Operating profit up 21.4% as revenue and margins improve.Credit book quality strengthens despite tighter lending and rising borrowing costs.Record store expansion achieved amid ongoing macroeconomic pressure.Sign up for your early morning brew of the BizNews Insider to keep you up to speed with the content that matters. The newsletter will land in your inbox at 5:30am weekdays. Register here.Support South Africa’s bastion of independent journalism, offering balanced insights on investments, business, and the political economy, by joining BizNews Premium. Register here.If you prefer WhatsApp for updates, sign up to the BizNews channel here..BizNews Reporter.Lewis Group Limited delivered a robust set of interim financial results for the six months ended 30 September 2025, reporting firm growth in revenue, operating profit and shareholder returns despite the increasingly constrained consumer environment. The retailer grew operating profit by 21.4%, driven by stronger margins, disciplined cost control and solid credit performance.Revenue and profit momentumTotal revenue rose 11.3% to R4.8 billion, supported by gains across merchandise sales, effective interest income, ancillary services and insurance. Merchandise sales increased 6.7% to R2.5 billion, with the traditional retail division – accounting for nearly 90% of sales – expanding by 6.4%. The speciality segment, which includes UFO, Bedzone and Real Beds, delivered a strong 9.1% increase.Other revenue grew even faster, rising 16.7%, benefiting from the increase in credit sales over recent periods. Credit sales themselves grew by 8% and now contribute 70.3% of total merchandise sales, compared with 69.4% a year earlier.Cost containment helped translate revenue gains into bottom-line strength. Operating costs rose 10%, below revenue growth, allowing operating profit to climb to R522 million and pushing the operating margin up by 250 basis points to 20.7%. Gross margin nudged up to 41.0%, the mid-point of management’s target range.Store expansion and credit book qualityLewis also advanced its expansion strategy, opening a net 40 stores during the period—the most the Group has added in any half-year. This means the company has already met its full-year store growth target, pushing the total network to 958 stores.Despite weaker consumer finances nationally, the quality of the credit book continued to improve. The proportion of satisfactory paid accounts increased to 82.7%, while the impairment provision ratio edged down to 36.9% from 37.1% in the prior period. Management noted that this improvement reflects a healthier composition of the debtors portfolio.Headline earnings per share increased by 16.8% to 648 cents, while earnings per share rose 13.8% to 619 cents. Shareholders will receive an interim dividend of 337 cents, up 12.3%. Net asset value per share climbed 6.6% to R98.23.The pressures beneath the surfaceDespite the strong performance, several indicators reflect the strain of operating in a weak economy.Growth in the credit book—now 14% higher at R8.5 billion—required increased borrowing, pushing net finance costs up by R26.7 million to R114.4 million. Gearing rose to 48.5%, while the borrowings ratio increased to 29%. Debtor costs also rose 12.9%, reflecting both the larger book and consumer stress.Management tightened lending criteria in response to rising risk, with the credit application decline rate increasing to 41.2% from 37.4%. Impairments and capital items more than doubled to R20.7 million, largely due to a right-of-use asset impairment relating to UFO. The collection rate weakened slightly to 78.3%.Outlook: caution amid political and economic uncertaintyLewis warned that the domestic operating environment remains difficult. High unemployment, political uncertainty and sluggish economic growth continue to suppress discretionary spending. The Group assigns a 70% probability to its “downside scenario” for the economy in its forward-looking assessments.With consumers under pressure, management expects ongoing challenges but plans to defend sales through aggressive Black Friday and festive-season promotions, supported by continued network expansion. A further 15 to 20 new stores—mainly in specialist bedding—are planned for the second half of the year.Overall, Lewis’ interim results reflect a retailer delivering above-trend profit growth through tight cost control, disciplined credit management and strategic investment, even as economic headwinds intensify..Read the results in full by downloading the PDF below

Lewis lifts profit 21% as credit demand and margins strengthen

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