And the downgrades continued yesterday with Fantastic Holdings Ltd (FAN), the country’s third biggest furniture retailer, revealing a sales and earnings fall that could cut net profits for the 2012-13 year by more than 30%. That could threaten the final dividend for the year as well.
In fact it is also possible that Fantastic could report a small loss for the second half if sales don’t improve between now and the end of June.
Naturally the shares plunged on the news, losing 89c to more than 30% to end at $1.99. The shares hit a year low of $1.95 during trading yesterday.
FAN YTD – Downgrade Hits Shares
Blaming continued weakness in the retail sector and costs associated with "various strategic initiatives". Fantastic said it was now looking at a sharp drop in net after tax profit for the six months to June.
The company told the ASX that it now expects to report a net profit after tax (NPAT) in the range of $13.5 million to $15.5 million, compared to 2011-12’s underlying earnings of $21 million.
Seeing the company earned an after tax profit for the first half of $13.5 million (up 2.2%) for the December half year, it is very likely the second half could see a loss or a small profit.
"The sales strength usually experienced in March and April did not eventuate this year and subdued trading has continued into May," the company said yesterday in a short statement to the ASX
Fantastic Holdings operates retail outlets including Fantastic Furniture, Plush and Dare Gallery.
Fantastic joins Wesfarmers in downgrading earnings outlooks – last Friday Wesfarmers said its Target department store chain could see a sharp drop in profit for the June half year for various reasons, including weak sales, a rise in stocks and other costs.
Second half earnings could be as little as a loss of $8 million or as much as $12 million, well under the $91 million earned in the same half of the previous year.
The downgrade suggests that Fantastic might struggle to maintain dividend at the 6.5c paid as the final for the 2011-12 financial year.
The interim was listed to 7.5c a share, absorbing around 57% of profit, so there’s room for a small payment (i.e. a cut) in the final if the company wants to keep faith with investors.
But the downgrades from these two retailers sit oddly with the upgrade issued at the start of this month by JB Hi Fi which told the market its earnings for 2012-13 could be up 7%-11% on a sales lift of $50 million for the June half.
JB said it was now expecting to earn between $112 million and $116 million against the earlier guidance of $108 million to $112 million.
