So will Fantastic Furniture’s (FAN) surprise trading update on Monday manage to support the shares amid the current uncertainty caused by the loss of three senior executives in the last month or so and the increased volatility in the wider market?
First reaction yesterday was that the solid trading update had ended concerns that the loss of the executives, including CEO Stephen Heath were related to a sharp worsening in trading and profits (but the shares eased a touch).
After all Mr Heath had told the AGM in October that the company had seen a very strong 16.2% jump in like for like sales in the first quarter. That saw a short term jump in the share price, which then retreated as the wider market started souring off the back of sliding oil prices and problems in the Chinese markets.
The announcement last week that Mr Heath has quit (without an explanation) saw the shares slump 12%. On top of a small loss earlier in the month, the shares are down more than 16% since the AGM in late October.
In Monday’s trading update, Fantastic said sales for the half-year ending December 27 were expected to rise 10.6% to $270 million, underpinned by continuing strong same-store sales growth of 15.7% (only down a touch from the strong first quarter figure).
Net profit was expected to range between $10 million and $12 million compared with $7 million in the December 2014 half year.
Fantastic shares, which slumped almost 12% to $1.85 when Mr Heath’s departure was announced on Friday, recovered 5¢ to $1.90 on Monday.
FAN 1Y – Fantastic Furniture rebounds after CEO exit
The December 2014 figures include $12.4 million in sales from the Dare Gallery business which has been sold. Strip that out and the sales increase improves dramatically.
Fantastic has commenced a search for Mr Heath’s replacement, but analysts say Debra Singh, who ran Dick Smith when it was owned by Woolworths in 2011 and now runs the main Fantastic Furniture chain, is considered the most logical internal candidate.
Fantastic operates 134 stores across four furniture retail chains including Fantastic Furniture, Plush, Le Cornu and the Original Mattress Factory.
It releases its full interim results on February 25.
Surprisingly, given the strength of the sales and profit performance, Fantastic’s board made no mention of a dividend.
You would have thought that with investors uneasy about the loss of senior executives, especially the CEO, they would have hinted at improved rewards for shareholders to help settle confidence.
Fantastic shares lost more than 2% to $1.80 on Monday after the results were issued an hour ahead of the market’s 4pm closing time.
