Video | Agriculture | Confidence | Economy | Energy | Employment | Finance | Media | Property | RBNZ | Science | SOEs | Tax | Technology | Telecoms | Tourism | Transport | Search


First NZ cuts Michael Hill earnings forecast

First NZ cuts Michael Hill earnings forecast after weak sales

By Paul McBeth

Oct. 16 (BusinessDesk) - First NZ Capital expects to see weaker earnings at Michael Hill International but says there is still potential for the share price to rise.

Michael Hill yesterday reported an 8.8 percent slide in September sales to A$112.2 million and said its transition away from discount pricing was harder than anticipated. The shares sank 24 percent to 74 cents on the NZX yesterday, and recovered 2 cents in early trading today at 76 cents.

FNZC expects Michael Hill to generate a net profit of A$29.3 million in the year ending June 30, down from a previous forecast of A$36.3 million. Analyst Andrew Steele said the first quarter is typically a trough period for the retailer, and he reduced his revenue forecast by 5.8 percent to A$557.6 million.

Steele also cut his target price for the stock to $1.01 from a previous target of $1.35 due to the lower earnings forecast. Given yesterday's slump in the share price, he retained an 'outperform' rating, although he doesn't anticipate the market will regain its confidence in the stock in the near term.

"This poor sales result was driven by the company’s shift away from reliance on discount-based pricing; however, this change was made without sufficient levels of marketing and promotional activities to drive top-line sales," Steele said in a note to clients. "We would caution against extrapolating out one weak, low-profit quarter across the full year."

Michael Hill is overhauling its business after giving up on a decade-long attempt to crack the US market and winding up its Emma & Roe sub-brand. That cost the retailer A$25.5 million in one-off costs writing down the value of the assets and paying fees to exit leases. It now plans to invest additional capital in its Australian business, which accounts for more than half its sales.

Former chief executive Phil Taylor stepped down from the role after two years in the top job due to health concerns. The long-serving executive will stay on as a consultant for the next six months to help ease his replacement into the job. Retail veteran Daniel Bracken - previously the head of Specialty Fashion Group - took over the reins yesterday.

Michael Hill shareholder Kingfish today said Taylor's tenure was short and difficult, encompassing a period of change for the retailer. Kingfish is a listed investment entity managed by Fisher Funds. Its shares fell 0.7 percent to $1.36.

"Bracken’s superior expertise as a retailer will be welcome in improving performance in the slimmed-down core business, although we are wary of expecting too much too quickly," Fisher Funds senior portfolio manager Sam Dickie said in its latest monthly update.



© Scoop Media

Business Headlines | Sci-Tech Headlines


Super Fund/Canada Bid v NZTA: Tow Preferred Bidders For Auckland Light Rail

The two preferred delivery partners for Auckland light rail have been chosen and a final decision on who will build this transformational infrastructure will be made early next year, Minister of Transport Phil Twyford announced. More>>


9.3 Percent: Gender Pay Gap Unchanged Since 2017

“While it has remained flat since 2017, the gender pay gap has been trending down since the series began in 1998, when it was 16.2 percent,” labour market statistics manager Scott Ussher said. More>>


Ex-KPEX: Stuff Pulls Pin On Media Companies' Joint Ad-Buying Business

A four-way automated advertising collaboration between the country's largest media companies is being wound up after one of the four - Australian-owned Stuff - pulled the pin on its involvement as part of a strategic review of its operations ... More>>

Bus-iness: Transdev To Acquire More Auckland And Wellington Operations

Transdev Australasia today announced that it has agreed terms to acquire two bus operations in Auckland and Wellington, reaching agreement with Souter Investments to purchase Howick and Eastern Buses and Mana Coach Services. More>>