- Portmeirion warns inflation impacting spend
- Homewares company is successfully passing on cost increases
- Says order books for Christmas are healthy
Shares in Portmeirion (PMP:AIM) cheapened 7.7% to 438.5p after the homewares manufacturer warned, unsurprisingly perhaps, that consumer sentiment and spending is being impacted by inflation.
With a heavy second half sales weighting, the company behind the eponymous Portmeirion brand as well as Spode, Royal Worcester and Wax Lyrical said it remains ‘cautious and watchful’ as to how macro conditions develop as the year progresses.
PASSING ON COST HIKES
Despite an increasingly difficult market backdrop, Stoke-on-Trent-based Portmeirion grew sales by 2% year-on-year for the first four months of 2022.
Gross margins increased by 50 basis points, said the company, demonstrating ‘the strength of our brands in passing on cost increases through price rises’.
However, investors were spooked as the ceramic tableware-to-home fragrances maker flagged ‘a significant change to consumer sentiment and spending since last year as consumers deal with the impact of inflation in food staples, energy and fuel prices’.
In addition, the company warned it has seen ‘further Covid-related disruption in supply chains and sales markets, including China’, though so far it has ‘successfully mitigated these challenges by forward-ordering stock and having long term energy contracts in place until March 2024’.
Portmeirion expressed confidence that its ongoing strategic investments in factory automation and online platforms will enable future growth in sales and insisted order books for the both the critical Christmas season and its wider international markets ‘remain healthy’.
‘We have started the year with good momentum against a backdrop of rising costs, supply chain disruption and wavering consumer confidence,’ commented CEO Mike Raybould.
‘Whilst we remain mindful of ongoing disruption to global supply chains and inflationary cost pressures, I am confident that our continued investment across key areas of the business, the strength of our heritage brands and our exciting roadmap for new products and ranges ensure that we are well placed to continue growing the group and delivering long term value to our customers and our shareholders.’
BROKER VIEWS
‘With 80% of profits generated in H2 we leave our forecasts unchanged for now but clearly much will depend on the state of consumer demand in the months ahead,’ wrote Singer Capital Markets.
‘We expect to get better clarity with the H1 update in July but equally, geographic diversity, self-help and strategic repositioning should further help mitigate various pressures.’
‘If today’s trading update has a cautionary tone then it should surprise no one,’ said Panmure Gordon.
‘This is already reflected in the recent share price weakness, albeit not out of line with the wider consumer discretionary sector as inflation in staples and energy prices takes its toll. However, if what really matters is how a business copes with unexpected and wild movements in its external environment then surely today’s news that the company increased revenues and improved margins year on year in the January to April period should reverse the share price decline.’
