The profit warnings, or hints continue from the updates and AGM season, with two more warnings yesterday from retailers, including industry major, Harvey Norman.
It’s a sign of the toughness of the local economy with the Aussie dollar strong, interest rate rises pressing down on demand, consumers hesitant (see the feature story today) and price cutting rampant, which also helps explain the fall in inflation in the September and June quarters.
We have already seen the likes of JB H-Fi warn that sales in the first half of 2011 were running 5% under budget (but were still up an impressive 12.2%). QBE, which reported a 39% slump in first half profits and weak revenue, softened up the market this week to expect more of the same.
Coca Cola Amatil also told the market this week that a small foreign exchange loss and the impact of a wet Spring had made trading tougher than expected. In fact the CPI figures showed a fall in the cost of soft drinks in the September quarter.
Clough shareholders were told (in a presentation mind you) 2011 earnings would be down "20-25% after a weak first half and second half recovery. Clough services the resources sector.
And property giant, Stockland told shareholders last week that revenue and profits would be weighted towards the second half because of delays to property approvals and housing starts (and starts in its retirement division) caused by bad weather in several states.
And fund manager Perpetual has forecast a basically flat first half profit for the six months to December.
The Commonwealth Bank wasn’t positive about the current half, although the NAB and ANZ were both more upbeat than the CBA in their profit announcements on Wednesday and yesterday.
Asciano said its coal freight business wasn’t doing as well as it had expected, even though business levels were up, while throughput at some of its ports was down a touch.
Resource groups such as Macarthur Coal this week revealed a massive profit upgrade; it could equal 2009’s earnings in the first half thanks to higher prices and solid export sales.
Iron ore groups such as Fortescue seem to be doing well and larger miners such as Rio Tinto and BHP Billion will also do well from most areas of business.
Qantas should report higher earnings at its AGM on Friday.
Travel agency, Flight Centre, has also upgraded its outlook in recent weeks.But its AGM was told yesterday in brisbane that the retail market had softened recently and the company was now looking for it to slow further in the next nine months.
It’s companies operating in the domestic economy which are doing it tougher than many investors expected.
Woolies struggled in the first quarter with a less than solid rise of 2% in same store sales in his core supermarkets and liquor business.
Coles did better with a 6% rise, but both report some damage from the dollar rising faster than they can sell imported products, especially consumer electronics.
That means the retailers got stuck with higher-priced stocks which they have to discount and cut margins to move.
Harvey Norman’s first-quarter sales growth ground to a halt in Australia and the company yesterday warned of a 30% fall in quarterly profits, some of that coming from non retailing costs.
And small Sydney-based women’s fashion group, Noni-B yesterday revealed a 3% fall in first quarter sales to shareholders at the AGM in Sydney.
"Despite our stronger operational position our sales were down approximately 3 percent in the first quarter and our margin reduced slightly as a result of continued discounting in the market that we had to follow," chairman Lynn Wood told shareholders.
"During September, consumer confidence fell associated with uncertainty around the federal election and this fall significantly impacted our sales result for the quarter," she said.
Harvey Norman’s warning echoed the company’s experience in the final quarter of 2008 and the early months of 2009 when it was the collapse of demand (and a falling Australian dollar) that did the damage, not the impact of sluggish demand and a higher dollar.
It revealed a 1.6% rise in headline sales across its national and international operations to $1.54 billion.
However, like-for-like sales for its global operations over the quarter fell by 0.6%.
And its key Australian market saw flat same store sales. In New Zealand sales were up 4.6%, in Slovenia up 7%, but in Ireland sales were down 3.9% (but up 6.4% in Northern Ireland).
As a result Harvey Norman shares fell 1.5% to $3.38 and Non-B shares were steady on $1.17.
"Global Sales have been negatively affected by a 1.8% deterioration in the NZ$, a 20.2% deterioration in the Euro and a 14.8% deterioration in the UK Pound, from 1 July 2010 to 30 September 2010," Harvey Norman told the market.
The company said its local franchisees sales had indicated that furniture and bedding continued to expand market share despite the industry experiencing a slowdown in housing. There was growth in electrical but ongoing price deflation generated weaker revenue for the quarter.
Harvey Norman said that unaudited accounts for the first quarter of its 2011 financial year indicated that pre-tax profit would be $77.7 million against $112.4 million for the corresponding period last year, a fall of 30.8%.
The company blamed the falling profits
