Lewis goes upmarket in UFO deal


Lewis goes upmarket in UFO deal

Published Date: 2017-10-20 | Source: Stephen Gunnion | Author: Stephen Gunnion

Lewis goes upmarket in UFO deal

The furniture retailer says United Furniture Outlets will give it access to more well-heeled customers

Lewis is breaking away from its mould of selling furniture to the lower to middle end of the market in a R320 million deal that will see it buy the 30-store United Furniture Outlets chain.

Lewis says UFO is recognised as a luxury brand with a value offering to the "upper consumer spectrum" in the LSM 9-10 segment of the market. The business was established in 2004 and more than half of its stores are in Gauteng. It says the deal will help it improve its economies of scale and penetrate new market sectors through a wider, more exclusive product range. It will also increase its cash-to-credit sales ratio. Lewis says the UFO brand and business model is scalable and it will have the opportunity to extend its store footprint across the country and into neighbouring states.

Lewis says it will use existing cash resources to fund the deal and will defer R16 million of the payment subject to confirmation of UFO's net asset value at the effective date of the transaction. For the year to end February, UFO's net assets were valued at R66.4 million and it made an attributable profit of R21.9 million. The unaudited balance sheet at the end of August reflected net assets of R82 million.

The company's shares slipped 0.8% to close at R26.60.

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