Shares in troubled department store Myer plunged by more the 44% yesterday for no apparent reason.
The only explanation was that investors expect the country’s department stores to be some of the hardest hit by the coronavirus pandemic.
The shares ended at 9.5 cents, down 44.1%, near the day’s (and all-time) low of 9.3 cents.
The slump means major shareholder and Premier Investments chairman Solomon Lew’s stake is now worth over 90% less than his initial purchase price of $1.15.
Mr. Lew owns around 11% of Myer. Premier is due to release its interim results today.
The shares slumped 12.3% yesterday to $10.37.
The company’s exposure offshore for its Smiggle chain raises the chances that their os worse to come in the second half of the 2019-20 year.
BlueScope Steel shares rose, then tailed away after it pulled its full-year guidance less than a month after reaffirming the outlook for the rest of the 2018-20 financial year in its interim financial results last month.
The steelmaker said there had been a decline in economic outlook and sentiment over recent weeks, as governments around the world implemented containment measures to curb the spread of the virus. The shares first edged up 10% to $10.40.
Then, as market sentiment switched back to negative, they lost those gains and eased back into the red to finish at $9.01, down 4.1%.
BlueScope, which has significant operations in the US and supplies steel used in the car industry, cited an overnight decision by “ number of automakers in North America” (Ford, GM, and Fiat Chrysler) to temporarily cease production.
It said it was not yet clear what impact the decision to stop US car-making would have on its North Star plant in the state of Ohio.
It also said it had “experienced business interruption due to national shutdown in Malaysia”.
On February 24, when it released its first-half results, BlueScope told the market it was expecting second-half underlying EBITDA (earnings before interest and tax) to be similar to the first half, which was $302.4 million.
“We are in a strong position to withstand these uncertain times and for when the virus risk recedes and economies rebound,” CEO Mark Vassella said yesterday.
“In recent years BlueScope has put a lot of work into transforming the business and is well equipped to operate in this challenging environment. The balance sheet is strong, with net debt at 31 December 2019 of $47 million, or $358 million net cash including the impact of operating lease capitalisation, and liquidity of $2.5 billion,” he said.
The company said demand in Australia had remained robust so far this half and volumes had been stable in the US. And in China, where the company has a number of plants, operations are ramping up after its factory workforce had been hit by tough travel curbs in response to the virus.
To underline the increasing uncertainty in the local media, Nine Entertainment yesterday withdrew its 2019-20 earnings guidance given with the interim results in February.
The decision and downgrade saw the company’s shares slide to 87 cents, breaking the $1 level for the first time since the combined company was created from the takeover of Fairfax Media in late 2018.
The shares hit an all-time low of 85 cents.
The news also saw the shares of Seven West media slump further towards oblivion – down to 7.8 cents a share from 11 cents. The shares hit a new low of 6.7 cents.
Nine said that that guidance was based “on a defined set of advertising market assumptions” which have now become less clearer as a result of the rapid spread of COVID-19 which “is beginning to have an impact on Nine’s markets”
“The short term impact remains limited to date, with Nine’s March quarter FTA ad revenues continuing to track close to flat and overall results for the quarter broadly in line with Company expectations.
“However, the forward ad market is becoming increasingly difficult to reliably predict. As a result of this Q4 uncertainty, Nine considers it prudent to withdraw its FY20 guidance.
Discretionary retailers are experiencing varying levels of impact from the coronavirus, with small-cap retailers Lovisa and City Chic Collective releasing contrasting trading updates yesterday.
One, Lovisa, was downbeat, the other, City Chic was a qualified upbeat – both for investors the news was the same, sell, and sell heavily, which they did.
Lovisa, which sells jewellery through a number of small-format stores across Australia, Asia, America, and Europe, told investors it had seen a declining trend across all its markets, with a “significant deterioration in sales”.
Outlets in France and Spain have been closed since the start of the week, along with all stores in Malaysia and 25 stores in the US. It warned it could not reliably estimate the financial impact of the coronavirus across the coming months.
“The Lovisa business remains keenly focused on the cost of doing business management and will be taking all actions available to manage both costs and cash flow during this period of uncertainty,” the company said.
The shares to $2.02 t before bouncing to end at $2.45, down 44%.
Meanwhile, women’s clothing chain operator, City Chic said its comparable sales to date are up a solid 8.6%, largely due to the company’s recent acquisition of US online retailer Avenue, which shifted two-thirds of its sales online.
However, the company warned it would still likely see a hit to spending, and said the full-year impact was also uncertain at this stage.
The company’s Chinese supply chains were up and running again, it said.
The shares, however, slumped nearly 25% to $1.205 in the wake of that announcement. The recovered to end at $1.30 for a loss of 18.7% on the day.
And an attempt by Afterpay Touch CEO, Anthony Eisen to settle its slumping share price failed yesterday after investors ignored reassurances he made about the company’s finances and its business model in a letter to shareholders.
Afterpay’s shares lost another 22.4% (not as nasty as the 33% slump earlier this week) to end at $9.90. At this level, the shares are down 66% year to date.
In his letter, Mr. Eisen claimed the coronavirus pandemic has not had a material impact on the buy now pay company’s business.
“Afterpay has not been immune to these market concerns which is evidenced by the volatility in our share price over the recent weeks and days,” he said.
“We are fortunate to have a business model, balance sheet and customer base that creates a level of protection in times of economic uncertainty.”
Mr. Einsen listed six dot points in his letter to explain why the company’s balance sheet and business structure would shield them from the global economic downturn.
He said Afterpay had $1.09 billion of warehouse facilities which Mr. Einsen said could help grow underlying sales by an additional $15 billion.
That, combined with liquidity of around $672.1 million and cash reserves of $402.5 million would put the company in a position to fund its operating expenses and expand business activities in the medium term.
“We are progressing with the execution of our strategic objectives and will continue to communicate regularly with our retailers and customers to advise that we will support them through future periods of uncertainty,” Mr. Einsen said.
Investors were not reading or listening.
