Lewis (LEW) - Landing UFO
Summary
We are encouraged by LEW’s proposed acquisition of high-end furniture retailer UFO, which we believe could provide a sustainable revenue stream independent of credit sales.
The key risk with this acquisition is LEW’s lack of experience and limited success in merchandising for the higher-end market. We are reminded of its previous Lifestyle Living brand which had little success. However, given the current constraints to credit sales growth, we think that ensuring UFO’s success will be top priority for management.
Lewis Group is a holding company operating through two main trading subsidiaries, Lewis Stores Proprietary Limited, which provides a range of furniture and appliances, and Monarch Insurance Company Limited, a registered short-term insurer that underwrites Customer Protection Insurance benefits to South African customers. Co.'s segments include: Lewis, which sells a range of household furniture, electrical appliances and home electronics; Best Home and Electric, which is a retailer of electrical appliances, sound, vision equipment and furniture; and Beares/My Home, which is a retailer of upmarket furniture.
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