Wrap Text
GCR Upgrades Lewis' National Scale Issuer Rating to AA-(ZA) From A+(ZA); Robust Earnings Growth; Outlook Stable
LEWIS GROUP LIMITED
(Incorporated in the Republic of South Africa)
(Registration number 2004/009817/06)
JSE share code: LEW
ISIN: ZAE000058236
Bond Code: LEWI
("Lewis Group"; "Lewis"; the "group"; or "the Company")
GCR UPGRADES LEWIS' NATIONAL SCALE ISSUER RATING TO AA-(ZA) FROM
A+(ZA) ON SUSTAINED ROBUST EARNINGS GROWTH; OUTLOOK STABLE
Lewis Group is pleased to advise that on 13 July 2026, Global Credit Ratings ("GCR")
upgraded Lewis Group's long- and short-term national scale issuer ratings to AA-(ZA)
and A1+(ZA), respectively, with the Outlook revised to Stable from Positive.
The ratings are as follows:
National long-term issuer rating: AA-(za)
National short-term issuer rating: A1+(za)
Outlook: Stable
The announcement released by the GCR stated the following:
The upgrade of Lewis Group Limited's ratings reflects its sustained earnings growth
through economic cycles, anchored by a resilient business model that combines a
core focus on retail with strong credit-based sales. While the expanding credit book
has necessitated increased debt utilisation, the robust cash generation from the credit
book has supported strong liquidity and sustained conservative leverage metrics.
Our assessment of Lewis' earnings profile has improved following sustained earnings
growth, notwithstanding fluctuations in the business cycle. Revenue increased by
11.1% to ZAR10.3 billion ($635 million) in financial 2026, ended 31 March, as
merchandise sales grew by 7.3% and financial services (insurance and interest
services) and ancillary services income increased by 15.7%. The higher contribution
from financial services, which does not carry direct sales costs, supported EBITDA
growth to ZAR1.8 billion in financial 2026 from ZAR1.5 billion in financial 2025.
Notwithstanding the strong growth in the debtor's book, Lewis has maintained stable
performance metrics with non-performing accounts at 9.1% and satisfactory paid
accounts at 75.6%, contributing to a lower debtor's cost ratio of 14.3% (financial 2025:
15.0%). Accordingly, the GCR calculated operating margin widened to 12.6%
(financial 2025: 12.4%). Cost pressures also eased due to a favourable movement in
the ZAR/USD exchange rate. Lewis remains well positioned to defend its market share
and generate sustainable operating cash flows over the medium term. Although
inflationary pressures could lead to a slight narrowing of the operating margin in
financial 2027, GCR expects it to remain above 10%, with EBITDA growth sustained.
Lewis's competitive position is supported by strong market share and brand equity in
the low- to middle-income segment, where its value proposition in consumer durables
and credit retailing has demonstrated its resilience through weak economic cycles.
The group operates an extensive store network, rising to 976 stores in financial 2026
from 918 in financial 2025, including well-established brands and an expanding
specialist bedding portfolio. Lewis's proximity to customers, same-day delivery
capability and debit order collections support effective sales execution and collections.
The group's credit retailing expertise remains a key competitive advantage, with credit
sales accounting for 69.4% of merchandise sales in financial 2026, providing
diversified sources of income through financial services and ancillary services which
contributed 47.2% of total revenue. However, the ratings remain constrained by its
smaller scale and narrow sales concentration. Geographic diversification is limited,
making the group susceptible to the macroeconomics of South Africa, specifically
discretionary consumer spending and the credit cycle.
Lewis's leverage profile remains strong, despite gross debt increasing to ZAR2.4
billion in financial 2026 (including lease liabilities), from ZAR2.1 billion previously.
Excluding finance leases, ZAR1.4 billion in new longer-term debt was raised to support
the expansion of its credit book. Nevertheless, leverage ratios remained well
contained, with net debt to EBITDA (including lease liabilities), reported at a stable
1.2x (financial 2025: 1.2x). GCR-calculated net interest coverage strengthened to 8.4x
in financial 2026 (financial 2025: 7.9x) due to lower funding costs. These metrics are
expected to remain broadly stable, with ample headroom against financial covenants.
However, operating cash flow to total debt softened to 24.7% (financial 2025: 27.6%)
and is expected to remain within 20%-30% over the medium term as credit sales
continue to outpace cash sales. Positively, Lewis also maintains wide funding access
from four domestic banks. In September 2025, the group issued a three-year, ZAR500
million floating rate note, and intends to issue further notes given the favourable
funding terms available.
GCR-calculated liquidity coverage is expected to remain above 2x over the next 24
months, supported by Lewis' sizeable debtors' book, which generates monthly
collections in excess of ZAR500 million. Liquidity is further reinforced by approximately
ZAR1.1 billion in unutilised committed and non-committed facilities, providing
substantial headroom above budgeted capital expenditure of c. ZAR160 million and
minimal short-term debt maturities of ZAR41.6 million. While Lewis continues to return
excess cash to shareholders, higher dividends or share buybacks are not expected to
weaken liquidity coverage over the outlook period.
Outlook statement
The Stable Outlook reflects GCR's expectation that Lewis' continued retail network
expansion, complemented by the credit sales offering, will sustain strong earnings
growth. GCR also expects the group to maintain a conservative leverage profile and
robust liquidity, notwithstanding the greater utilisation of debt funding.
Rating triggers
A rating upgrade is not foreseen over the short to medium term. However, an upgrade
could occur over the longer term if Lewis materially increases its business scale and
revenue base. GCR would also expect the group to sustain strong collection rates on
its debtors' book, supporting moderate leverage metrics and robust liquidity coverage.
Negative rating action could follow a material decrease in revenue and profitability,
potentially arising from a weaker operating environment or deterioration in the debtors'
book performance. Ratings pressure could also emerge if Lewis adopts a more
aggressive financial policy to support business growth and/or shareholder returns, or
if its liquidity position weakens.
The information contained in this announcement has not been reviewed or reported
on by the Company's external auditors.
Cape Town
14 July 2026
Sponsor: The Standard Bank of South Africa Limited
Debt Sponsor: Absa Bank Limited, acting through its Corporate and Investment
Banking Division
Date: 14-07-2026 11:00:00
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