Failed discount plan behind F&P earnings downgrade

Stuart Broadhurst, chief executive of Fisher and Paykel Appliances. Photo / Paul Estcourt

An unsuccessful discounting strategy contributed to the poor November trading results that forced Fisher & Paykel Appliances to downgrade its earnings guidance today, says the firm's boss.

Chief executive Stuart Broadhurst said the Auckland-based, listed 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," he said. "While we got a growth in market share [as a result of the discounting] the market size didn't grow enough to make that discounting worthwhile."

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

The company's shares have slid nearly 9 per cent on the NZSX, down 5c to 52c, equal to their lowest value during the past three months.

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

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

Broadhurst said NZX continous disclosure regulations left F&P Appliances with no option other than 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 facing difficult trading conditions alone.

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

Broadhurst said: "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.

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

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

"One of the key messages out of this 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."