- Markets ‘challenging and unpredictable’
- US disruption and Korea destocking
- Wax Lyrical performance improving
Shares in British ceramics maker and homewares retailer Portmeirion (PMP:AIM) plunged 17% to a 10-year low of 170p on a warning annual profits will fall significantly short of forecasts, primarily due to delays getting stock into the US in time for the Christmas and destocking in South Korea.
With its markets remaining ‘challenging and unpredictable’ during the seasonally stronger second half, the Stoke-on-Trent-based company now expects to report year-to-December 2024 revenue of £90 million.
That’s £10 million shy of Shore Capital’s £100 million forecast, while adjusted pre-tax profit is forecast to come in at £1 million, materially below the £4.5 million the house broker was looking for.
CONFIDENCE UNDERMINED
The company behind the namesake brand, not to mention Spode, Royal Worcester, Pimpernel, Wax Lyrical and Nambé, Portmeirion explained that its UK and US markets have been impacted by political and macroeconomic developments.
Worries about the US elections and the UK Budget undermined consumer confidence at the start of the fourth quarter, developments compounded by ongoing supply chain and shipping disruption into the US delaying product deliveries in time for the holiday period.
‘Whilst consumer demand and pull through in both regions were up across the key Thanksgiving and Black Friday holiday period, overall sales and replenishment across October and November 2024 were below the group’s expectations,’ said the company.
And sales in South Korea have been impacted by weak consumer confidence and continued destocking.
‘Whilst higher stock levels of existing ranges have dissipated somewhat, the market remains challenging as consumers continue to deal with higher inflationary pressures, interest rates and weaker currency,’ warned Portmeirion.
GROUNDS FOR OPTIMISM
There were positives in the update however, with Portmeirion ‘encouraged by the growing consumer demand for our Spode ranges’ in the US.
Furthermore, revenues in its home fragrance division, Wax Lyrical, are expected to be up over 25% year-on-year, and with ‘improved levels of profitability’, thanks to new listings with grocers.
WHAT DID THE CEO SAY?
CEO Mike Raybould commented: ‘We took action at the start of the year to reduce our overhead base by circa £4 million (circa 10%) which will give us a leaner cost base from which to grow profits as consumer markets improve. The impact of lower sales in South Korea and the resulting lower utilisation of our UK tableware factory has had an adverse impact on 2024 profitability, excluding which, overall group net profitability would be significantly up on 2023.’
Raybould added: ‘Whilst we expect the near-term market outlook to remain uncertain, we continue to focus on what we can control and are confident we can further strengthen our business model and ability to maintain and grow market share across our key markets.’
Shore Capital believes 2024 will now prove to be a base on which Portmeirion will build from. ‘Today’s news that the self-help measures to deliver circa £4 million of cost savings is on track should help to deliver the medium term margin improvement strategy,’ stressed the broker.
Dan Coatsworth, investment analyst at AJ Bell, commented: ‘It would be quicker to list what hasn’t gone wrong for the company as the update is truly a nightmare before Christmas.
‘Portmeirion has faced supply chain disruption in Asia, an impact from port strikes in the US and destocking in South Korea. It’s all added up to a profit warning which has smashed the share price. The company has taken costs out of the business and says it remains confident in the “medium-term outlook”. However, it has quite the repair job on its hands to restore investors’ confidence in the business.’
DISCLAIMER: Financial services company AJ Bell referenced in this article owns Shares magazine. The author of this article (James Crux) and the editor (Steven Frazer) own shares in AJ Bell.
