Lewis Group just posted 80.7% EPS growth, a 7% dividend yield, and generated R560M in cash. Here’s what’s behind the numbers and more from EasyAssetManagement.
Rising revenue and profits: Revenue rose by 13.5%, merchandise sales grew 9.2%, and operating profit surged 66.9% for the year ending March 2025. Headline earnings jumped 60.3%, with EPS climbing 80.7% thanks to share buybacks.
Value stock potential: Despite this strong growth, Lewis trades at a PE ratio of ~8, below book value, and offers a 7% dividend yield, indicators that the market hasn’t fully priced in its performance.
Credit performance is solid: Lewis’s collection rate sits at 78.9%, with 83.5% of customer accounts paid satisfactorily. Even with a 14.5% growth in the debtor’s book, debtor costs dropped 2.6%, and the business generated R560M+ in operating cash flow.
In a market where buzzwords like "AI" and "crypto" dominate the headlines, a good old furniture-and-finance business might not turn many heads—but maybe it should. Lewis Group, the retailer-slash-credit-provider behind many of South African living rooms, is quietly making its case as one of the JSE’s more compelling plays in its sector.
At its core, Lewis is more than just a retailer of household furniture, electronics, and appliances. It’s also a credit provider, and that’s where things get interesting. Over two-thirds of Lewis’s customers buy on instalment plans, and the group earns revenue not just from product margins but also from credit interest, insurance, and associated services.
Through its wholly owned insurer, Monarch Insurance, Lewis also offers credit life and asset protection policies, effectively monetizing each transaction far beyond the initial sale. In other words, Lewis isn’t just selling sofas, it’s financing lifestyles.
The group’s target customer is typically a lower- to middle-income household, often living in rural or peri-urban areas where access to traditional credit is limited. These are families looking to furnish their homes in manageable monthly payments, and Lewis is perfectly positioned to meet that need.
Its broad retail footprint, spanning over 900 stores across South Africa and neighbouring countries, gives it unique access to this segment. Brands like Lewis, Beares, Best Home & Electric, and the more upmarket UFO provide multiple touchpoints for a diverse customer base.
Source: Lewis Final Results Presentation for the year ended 31 March 2025
What makes Lewis particularly intriguing at this moment is the strength of its recent financial performance. For the year ending March 2025, the company reported a 13.5% increase in revenue and an 9.2% rise in merchandise sales. More impressively, operating profit surged by over 66.9%, and headline earnings jumped by 60.3%. Management’s decision to buy back shares also amplified this performance, culminating in an 80.7% increase in earnings per share.
And yet, despite this robust growth, it seems the market has been slow to catch on. Lewis currently trades at a price-to-earnings ratio of around 8 times, an astonishingly low multiple for a business that has EPS growth exceeding 80% for the full year. Its dividend yield hovers around 7%, and the stock is priced below its book value disclosed in its latest financials. For investors seeking value, this is about as compelling as it gets.
But, of course, no investment is without risk. Lewis’s business model is heavily reliant on credit, which introduces a layer of complexity. It requires upfront investment in inventory, which is then sold on instalment. That means receivables balloon, and cash flow can be tight. However, the company has shown it is able to deal with this issue effectively generating over R560M in cash flow from operating activities for the year.
While the business may heavily be exposed to the credit market there are positive indicators that the credit book is well manged. The business classifies 83.5% of customer accounts as satisfactorily paid and collection rates remain strong at 78.9% for the period. Additionally, despite the increase in the size of the credit book (+14.5% growth in the debtor’s book) debtor’s cost reduced by 2.6%. Impairment provisions are also in place, covering around 37% of the gross debtor book. This approach to acts as a cushion against future credit losses, especially important given the economic backdrop.
From a strategic standpoint, Lewis faces the same headwinds as many local retailers: constrained consumers, elevated unemployment, and tight competition from both traditional furniture chains and emerging online platforms. But Lewis’s strong operational execution, prudent credit management, and adaptable store format may put it in a better position than many of its peers.
EasyAssetMangement holds Lewis Group in our EasyETFs Balanced Actively Managed ETF . If you are looking for exposure to global or AI themed equities check out our EasyETFs Global Equity Actively Managed ETF and our EasyETFs AI World Actively Managed ETF.
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