Weak consumer spending is hitting the retail space hard on Tuesday with gloomy commentary coming from trendy trainers seller Footasylum (FOOT:AIM) adding to yet another profit warning from Debenhams (DEB).
The UK department store chain has warned on profit for the third time in six months, blaming poor trading on increased competitor discounting and weakness in key markets. That sees the company lower its pre-tax profit guidance for the current financial year to between £35m and £40m. The market had been expecting £50.3m.
That gloomy tune does not chime with investors who embark on a hefty sell-off in the stock, slumping around 15% to 17.44p, one of the day’s biggest losers across the FTSE All-Share index.
The FTSE 100 is down around 50 points in early trading at 7,581.47.
FOOTASYLUM SPOOKS MARKET
Footasylum reported a 33% jump in sales for the year to 24 February to £194m, boosted by the opening of ten new stores. Pre-tax profit is up 4% at £8.4m.
But the real concern for investors comes from cautionary statements about trading down the line from chief executive Clare Nesbitt.
‘While our core target market of the 16 to 24-year-old consumer has proved to be comparatively resilient in a downturn, our trading since the beginning of the new financial year has undoubtedly been impacted by the widely documented weak consumer sentiment on the high street,’ she says.
Added to weak shopping trends elsewhere that has investors running for the hills, sending Footasylum’s share price plunging 40% to 101.5p. That makes the stock the biggest AIM faller and wipes out all stock market gains made since the company’s flotation in November last year.
But there some retail respite as value fashion chain Bonmarche (BON) reports a 38% jump in profits for the year to 31 March. That’s helped by a 34.5% leap in online sales which helps offset tougher high street trading.
Overall, like-for-like store sales are down 4.5%.
‘While we expect the market to remain difficult, trading since the beginning of the new financial year has been stronger than during the second half of full-year 2017-18 and is in line with the board's expectations,’ chief executive Helen Connolly reassures.
RESERVATIONS SLUMP
Retirement homes builder McCarthy & Stone (MCS) has warned that since April there has been a ‘noticeable decline in reservation rates as potential customers have exercised more caution due to ongoing economic uncertainty, a slower secondary market and a softening of pricing, particularly in the South East.’
That effectively means a cut to profit guidance this year, with the company now steering for between£65m and £80m, where it had previously been anticipating a £91m to £108m range.
The company has also unveiled a review of its business strategy, including the departure of chief executive Clive Fenton who will retire. This may spark speculation of a sale of the business.
Industrial power equipment supplier Ashtead (AHT) is a surprise share price faller on Tuesday, the stock off by nearly 6% to £22.35.
This is a shocking reaction to what on the face of its look like very solid full year results that include a hefty 20% increase in the dividend to 33p per share.
The figures show a 21% rise in pre-tax profit to £927m, helped by growth in the core North America region. Underlying profit growth, stripping out acquisitions, was an impressive 17%.
Chief executive Geoff Drabble says rental revenue increased 21% to £3.4bn and that ‘the board continues to look to the medium term with confidence’.
ELSEWHERE ON THE MARKET
Budget airline Flybe (FLYB) lost £20.5m last year on the back of poor weather conditions, higher maintenance costs, and IT investment. That was slightly higher than estimates and more than three-times the £6.7m loss chalked-up in 2017.
The share price stays flat at 39.9p.
British outsourcer Capita (CPI) has agreed the sale of its supplier assessment services business, including Constructionline. Funds run by Warburg Pincus will pay £160m in cash.
Those funds will come in handy given the £513m loss reported by the company last year. Shares in Capita rally 3% to 157.15p.
Ferguson (FERG), the world’s largest distributor of plumbing and heating products, on Tuesday posted a 17.1% rise in third quarter profit, helped by solid demand from US residential markets.
That helps shares in the group rise 1.5% to £59.78.
