Lewis Group is intensifying efforts to turn around its struggling UFO furniture chain while pressing ahead with an aggressive store rollout strategy.
In a frank assessment, Lewis CEO Johan Enslin admitted it has become a hard slog to turn around the fortunes of UFO, a business it bought in 2018 for R320m.
“Unfortunately for UFO, once again [it has not had] a very good trading year,” he said, noting that the division remains under pressure despite a modest rebound in the second half.
The group has begun restructuring UFO, closing three underperforming stores and planning to shut two more over the next 12 months.
These closures form part of a broader effort to “right-size” the chain and stabilise operations rather than expand aggressively. UFO currently operates 38 stores across South Africa.
“We really want to stabilise the business at this point in time,” Enslin said, after the release of the group’s results for the year ended March 2026.
Sales improved in the second half of the year under review after new furniture ranges were introduced in October, helping UFO move closer to break-even on a like-for-like basis. Management believes refining the merchandise offering will be key to regaining traction.
“There’s always a bit of misalignment where the offering is not exactly on target,” Enslin said, stressing that correcting this is central to the turnaround plan.
The company has also ramped up marketing investment, strengthening its internal team and appointing a new external agency to expand UFO’s reach. Still, broader macroeconomic challenges remain a headwind.
“With a better merchandise offering and improved marketing reach, we believe the business can move in the right direction over the next 12 months,” Enslin said.
High interest rates and elevated household debt continue to weigh on UFO’s target market.
“The number of customers that really have cash available for big purchases… can only be described as limited,” he said.
With a better merchandise offering and improved marketing reach, we believe the business can move in the right direction over the next 12 months.
— Johan Enslin, Lewis CEO
Unlike the core Lewis brand, UFO does not offer in-house credit, further constraining demand. Buy-now-pay-later options have been introduced, but uptake has been weak due to short repayment periods and high instalments.
While UFO struggled, the rest of the group delivered solid growth. Sales from traditional brands Lewis, Beares and Best Home & Electric — which account for 89% of group sales — rose 7.5% to R9.6bn. Merchandise sales increased 7.3% to R5.5bn. Sales in the stores outside South Africa, which represent 15% of the store base, increased 6.9% and accounted for 18.2% of group merchandise sales.
Group revenue surpassed R10bn for the first time, rising 11.1% to R10.3bn.
Despite constrained consumer spending, Lewis continued to invest in long-term growth by accelerating store expansion and growing its debtors’ book, which grew 15.2% to R9.2bn as the group’s credit customer base increased 11% to 77,000. The quality of the debtors’ portfolio remains sound, with paying customers at 82.6% from 83.5% in the 2025 financial year.
Credit sales remain a key growth driver as consumers rely more on financing in a constrained economy. Management is preparing for potential deterioration in collections by adjusting its borrowing ceiling and strengthening credit and collections teams. In the year to March, credit sales rose 9.6% and now account for 69.4% of merchandise sales, while cash sales grew 2.5%.
“Our customer growth has been very encouraging, particularly in attracting younger consumers,” Enslin said, highlighting a strengthened social media strategy on Facebook and Instagram. In the year to March, Lewis opened 58 stores, exceeding its target of 40, bringing its total footprint to 976 stores across South Africa, Botswana, Eswatini, Lesotho and Namibia.
Lewis plans to maintain its rollout pace of 40 stores per year, aiming to add around 200 stores in the medium term. For the 2026/27 year, the plan includes 25 traditional stores and 15 specialty outlets, while keeping UFO’s footprint broadly stable.
“There’s still plenty of runway in South Africa and the four neighbouring countries,” Enslin said, ruling out near-term expansion into additional Southern African Development Community markets.
Business Times
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