Arthur Kaplan and NWJ owner says lockdowns cost it R73m in sales

Micro-cap Luxe Holdings, the owner of jewellery chains Arthur Kaplan and NWJ, says the Covid-19 hard lockdowns last year cost it an estimated R73 million in sales.

Despite the financial hit, the group’s latest results published on Monday for the financial year ended February 2021, show that a strong recovery in the second half took it from an operating loss position at half-year (August 2020) to an operating profit for the full year.

Read: Luxe’s taste for jewellery hit by Covid-19

This is for its jewellery and watch division, which now forms its core continuing operations business after the exit from its food franchise business last year.

Luxe comes out of the old Taste Holdings business, with the renaming in-line with its strategic move out of fast-food to focus on jewellery retail.

Besides its NWJ and Arthur Kaplan jewellery stores, the group owns the World’s Finest Watches retailer.

“The jewellery and watch division’s [full-year] operating profit improved by 38% to R16.9 million [2020: R12.2 million] with a strong recovery in the second half of the year on the back of pent-up demand seeing second half profit improve to R22.6 million from an operating loss of R5.7 million at half year,” Luxe says in its full-year results media statement.

“The second half of the year was significantly better than the first, when stores were closed from the March 26, 2020 to May 31, 2020 during the level 5 lockdown, resulting in an estimated R73 million in lost sales,” it points out.

“Sales performance post-lockdown was more resilient than expected, exceeding expectations,” the group adds, noting that online sales growth surged 236% overall, while it grew by 174% on a like-for-like store basis.

While the growth in online sales is noteworthy and in-line with the boom in online retail generally, this growth comes off a low base and still only represents around 5% of the group’s overall sales.

“Our growing online business, the breadth of our product offering and the fact that community and neighbourhood store locations have outperformed major regional shopping nodes helped mitigate the effects of the pandemic on trade,” comments Luxe group CEO, Duncan Crosson.

He says that prudent management of costs and working capital, specifically inventory and creditors, helped to generate cash from continuing operations of R8.3 million and improve the positive cash position from continuing operations to R19.7 million (2020: R13.0 million).

However, Crosson made no mention of the group’s discontinued operations, including the closure of its Domino’s pizza stores in South Africa, despite this taking place during the financial year.

The group decided to cut its losses and exit the food business in late 2019, but the actual closures of Domino’s outlets happened just after Covid-19 hit last year.

Read:

Domino’s fall for Taste (March 2020)
Taste loses its appetite, will exit Starbucks and Domino’s (Nov 2019)

Taste Holdings sells Starbucks stores (Nov 2019)

While Luxe also did not make any close-out mention of the discontinued food business in its short-form results announcement on the JSE Sens either, it did note the narrowing of its loss for the financial year.

The group posted a headline loss per share of 80.3 cents, which it says is “an improvement from the headline loss per share of 941.9 cents in the prior corresponding year”.

This was when the fast-food and Starbucks franchise businesses (at the time) in South Africa, represented its core business.

Luxe points out in its Sens that its headline loss per share from continuing operations came to 60.2 cents for the financial year ended February 2021.

This was “in line with the prior year [loss] of 60.4 cents, despite the tough trading environment given the impact of the pandemic”.

The loss meant that no full-year dividend was declared by the group.

“Shareholders are reminded that historic per share metrics are adjusted to reflect the consolidation of the share capital of the company on July 8, 2020 [every one hundred ordinary shares were consolidated into one ordinary share],” Luxe explains in its Sens.

The group’s latest results came out just before the market closed on Monday.

Luxe’s share price was down just over 2.8% in morning trade on Tuesday, trading around R1.02 per share. This gives it a market cap of just over R23 million.

Its biggest shareholder currently is US-based Protea Asset Management LLC, together with JSE-listed investment holdings firm Conduit Capital. Other major shareholders include UBS Switzerland, the Aaron Beare Foundation and PSG Konsult.