In contrast to the good update from Kathmandu, shares in Australian Pharmaceutical Industries took a hammering yesterday after it scaled back its estimated profit growth for 2016-17 to just 5%, half its previous guidance.
API is one of Australia’s largest pharmaceutical distributors and fastest-growing health and beauty retailers with retail banners such as Priceline and Soul Pattinson Chemist and runs up against the gorilla in the sector, the rapidly growing Chemists Warehouse which is now the price setter in the sector (something many business writers forget).
API had forecast profit growth of 10% for 2016-17, but that has now been halved, and blamed on the further decline in consumer sentiment, despite the company maintaining retail market share in the period.
It is the latest retailer to issue a profit warning on the back of souring trading conditions, with Myer, The Reject Shop, Godfrey’s, Adairs, footwear company RCG, Oroton, Bellamy’s and car retailers AP Eagers and AHG all lowering earnings forecasts.
Just this week healthy fast food chain Oliver’s Real Food issued a profit warning only five weeks after it listed on the ASX. Some of its problems were related to the company getting used to the increased accounting rigour and processes for a listed company, as well as hiccups in what was an ambitious expansion plan
The Brisbane Broncos (which owns the NRL team of the same name and is 68% owned by News Corp yesterday produced an update – interim profit to June 30 will be higher, but a weak second half will see earnings for the full year down by 20% to 30%.
API said its pharmacy distribution business remained on track to meet expectations for the year and the company also expected reported net debt to be positive before December 2017.
“While we continue to see good market share results, solid growth in transactions across our network at 4 per cent up on fiscal 2016 and the roll out of new stores has remained on track, overall like for like sales has weakened due to consumers spending less per basket and on lower value items,’’ recently appointed API boss Richard Vincent said in the statement issued late Wednesday. API shares were hit by nervy investors (even though earnings will be up in the year to August 31). They closed down 13% at $1.53.
Brisbane Broncos shares ended at 50 cents (unchanged and untraded).
