Despite the solid economy and booming resource and infrastructure sectors, some companies operating in those sectors are struggling, as Coates Hire owned up to yesterday.(See below).
Women's fashionwear is one part of retailing though which is doing it tough because of the warm autumn, with downgrades from Noni-B and Specialty Fashion Group (the Old Millers chain) while Coles Group's Target found its women's fashion section struggled in the third quarter.
But overall most in retailing are booming, even if oil and petrol prices are hovering around those worrisome levels of a year ago. And some are doing very well, thank you, especially in the consumer entertainment sector of retailing, With LCD and plasma TV's home theatre, iPods and all manner of CE gizmos flying off the shelves, it's no wonder a leading CE retailer, JB Hi-Fi, produced a sharp earnings upgrade yesterday: one that could approach a 50 per cent rise in net earnings.
JBH said that good trading since February has resulted in the upgrade. Full year net profit is now forecast to be between $37 million and $39 million, or a rise of between 43 and 51 per cent on last year's record $25.8 million.
The news sent the shares racing to a new high of $10.07 (on an intra day basis), the first time they have been above $10 since listing at $2.10 around three years ago. They finished at $9.88, up 61c and a new all time closing high.So was this a one off, or a sign for the rest of the consumer entertainment sector? Harvey Norman ended unchanged on $5.19, but was initially easier while smaller rival, the Melbourne-based Clive Peeters ended 10c up at $3.20.
"Our unique retail model is performing strongly and should continue to benefit from strong comparable store growth, many new store opportunities, a low cost of doing business, better buying power and good management," JB Hi-Fi chief executive officer Richard Uechtritz said in the statement to the ASX.
"The newer games and computer categories continue to show promising growth as we finalise the roll out of the computer category to most stores by early FY08.
"These categories should be solid performers for JB Hi-Fi in years to come," he said.The company said at the interim profit release in February that it was comfortable with the consensus analyst forecast of $32.7 million net profit for its 2007 financial year.
But JBH now expected sales to rise by around 30 per cent, to more than $1.2 billion for the year ending 30 June 2007. Comparable store sales have increased to 10.2 per cent for the 11 months to the 31st May 2007 (HY07 5.8 per cent).
"The performance of our Clive Anthonys business has improved in the second half. "Stronger trading conditions together with some management changes and a closer alignment to the JB Hi-Fi way of operating has a resulted in improved comparable store sales, currently at -0.95% (11 months to the 31st May 2007) compared to -7.8% at the half year. "The first Clive Anthonys store in Sydney will open at Castle Hill in August and the company is perusing other opportunities for Clive Anthonys in Sydney.
"The company has taken control of the Hill & Stewart chain in New Zealand as of 1st March 2007. It is trading to expectations.
"The first New Zealand JB Hi-Fi store opened at the end of April and is trading well with at least three further JB Hi-Fi stores to open in New Zealand before Christmas."
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But what a difference to Coates Hire, the major operator in the competitive equipment hire business.
It said on May 1 it had received a number of approaches and had decided to conduct a 'strategic review'.
It said that while this was going on it would be business as usual and yesterday that stance was confirmed. It's just that business as usual won't be quite as profitable as previously indicated to the market.
The shares tumbled 25c to $5.90 on more than 7.6 million shares traded: obviously punters quitting the stock and taking profits.
COA said that NPAT for the current financial year was likely to be below the lower end guidance of $106 million given to the market in February this year. That will still above the 2006 result.
"Coates Hire Limited ("Coates") today announced that Operating NPAT (excluding significant one-off Project 64 and strategic review costs) for the current financial year was likely to be below the lower end guidance of $106m given to the market on 19 February 2007.
"Although the variance is likely to be less than 5%, the Board considered it prudent to inform the market in light of the strategic review announced on 2 May 2007. It should be noted that Operating NPAT is still expected to be ahead of prior year by at least 7.5%.
"Trading conditions together with overall demand have remained patchy and not met expectations especially for Allied Equipment and Coates North.
"Within Queensland, capacity constraints have caused project delays. However, with demand improving steadily, Coates now believes substantial improvement is likely to occur during first half FY07/08. In the medium term the Company's expectations for Coates North are very robust given the level of investment in project and infrastructure planned and committed.
"Trading patterns for Allied Equipment have remained relatively flat over recent months despite the improvement seen since December following the acquisition of Allplant.
"The main contributing factors were a slowing in mine production growth rates caused by bottlenecks (especially on the East Coast), an improvement in new equipment availability, and a shift in the own/rent ratio amongst miners, while at the same time shortages of skilled maintenance staff has led to a shift in market demand to newer rental equipment.
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