Credit ‘frenzy’ hits SA furniture group
FURNITURE and consumer electronics retail chain owner JD Group has blamed reckless lending by its competitors for its interim operating profit dropping by nearly half.
In the results statement for the six months ended February, it blamed “the frenzy to drive credit sales in the run up to the introduction of the National Credit Act, which was not the case at the JD Groupâ€.
Joshua Doore, Morkels, Russells and JD Group’s other credit retailers posted a 13 percent turnover decline to under R3billion from the previous year’s first half. Operating profit fell 45% to R300-million.
The group’s debtors book, managed by Maravedi, which is a joint venture with Absa and Thebe, saw its provision for doubtful debts increase 27% from R581million in August to R740m in February. Bad debt provision as a percentage of total arrears moved from 73% to 80% for the same period.
“These results confirm the severity of the indebtedness of the SA consumer,†said SA’s largest furniture retailer.
Its two consumer electronics chains that sell on cash rather than credit fared better. Incredible Connection grew sales by 21 percent while Hi-Fi Corporation’s declined four percent. The combined cash retail division’s turnover grew six percent to over R2bn, but operating profit dropped 14% to R131m.
Its Polish chain Abra nearly doubled operating profit to R23m on 44% revenue growth to R346m.
“We see the reduction in the group’s fixed overhead base as a priority and the necessary strategies are in place to achieve this goal,†the results said.
Steps to cut overheads include investing in a call centre business, Blakes, to centralise management of receivables.
All of the group’s retail chains are scheduled to be moved to the centralised system by the end of the year following a test run with Electric Express’ receivables.
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