Whiteware maker slashes forecast

Despite a discount strategy to boost sales volumes, F&P Appliances downgrades earning guidance again. Photo / APN

An unsuccessful discounting strategy contributed to the poor November trading results that forced Fisher & Paykel Appliances to downgrade its earnings guidance yesterday.

The listed Auckland whiteware maker had been trying to increase sales through marking down items in retail stores.

"In November we were offering discounts but we didn't get the [sales] volume we needed," said chief executive Stuart Broadhurst. "While we got a growth in market share the market size didn't grow enough to make that discounting worthwhile."

The company yesterday cut back its full-year earnings guidance for its appliance division to a range of $15 million to $25 million for the year to March 31 - down from the $28 million to $35 million the firm was predicting when it announced its first-half results at the end of November.

It is the second time this year F&P Appliances has trimmed its forecast.

The company's share price fell 5c to 52c after yesterday's announcement.

Full-year earnings guidance for the firm's finance business is expected to remain unchanged from the $35 million earlier predicted.

Broadhurst said NZX continous disclosure regulations left F&P Appliances no option but to advise the market of the lower-than-expected sales in its two key markets - Australia and New Zealand.

"We're certainly concerned about the retail landscape," he said.

"We don't see any reason to believe [sales are] going to improve through December and January, which are so critical for our [full-year] result - we're not going to do as well as we thought we would."

Broadhurst said the fact that the company's sales of technology and componentry to other manufacturers was also down indicated that F&P Appliances was not alone in facing difficult trading conditions.

It was difficult to predict when a pick-up in consumer spending would be seen, he said.

Broadhurst said appliances were a product category particularly hard-hit by the downturn, which left consumers less willing to shell out on big-ticket items such as dishwashers, washing machines and refrigerators.

"We don't see the macro[economic] environment changing in our markets any time soon."

First NZ Capital analyst Greg Main said the cut in guidance was disappointing, but highlighted the volatility of the appliance market.

Yesterday's announcement suggested the recovery for F&P Appliances would be more drawn out than earlier expected, he said.

Andrew Harvey-Green, a Forsyth Barr analyst, said the downgrade was "not insubstantial".

"One of the key messages is the huge amount of uncertainty about what [F&P] Appliances will actually be earning this year," Harvey-Green said.

"Things should be getting more certain the closer you get to year-end, but [with F&P Appliances] it seems to be going the other way."

Broadhurst said the company was not expecting to revise its earnings guidance again for the financial year ending March 31, 2011.

DOWNGRADE

F&P Appliances full-year earnings forecast to March 31, appliance division.

* Prior guidance - $28m to $35m.

* Revised guidance - $15m to $25m.