MARKET CLOSE: NZ shares fall, Kathmandu, TEL drop

MARKET CLOSE: NZ shares fall on Kathmandu disappointment, Telecom drops

August 4 (BusinessDesk) – New Zealand shares fell for the first time in six sessions after outdoor equipment retailer Kathmandu Holdings reported a shrinking profit margin and traders fretted the earnings season will feature cost control rather than growth.

The NZX 50 rose 12.821, or 0.4%, to 3037.564. Within the index, 20 stocks fell, 11 rose and 19 were unchanged.

Kathmandu tumbled 12% to $1.80 after the retailer said gross margins fell short of last year’s forecast at 63%, which is below both the 64.4% result in the previous year and 64% prospectus figure. Annual sales climbed about 14% to $245.5 million.

“Kathmandu really disappointed the market,” said Grant Williamson, a director at Hamilton Hindin Greene in Christchurch. “Sales held up well but the margins did not.”

“Investors have been burned a number of times with spin-offs from private equity,” he said.

Among other retailers, children’s clothing chain Pumpkin Patch fell 5.4% to $1.77, Warehouse Group decreased 1.7 percent to $3.54, clothing chain Hallenstein Glasson Holdings dropped 1.9% to $3.61 and Briscoe Group sank 3.2% to $1.20.

Telecom Corp. fell 0.5% to $2.01. Lack of growth “has been a major concern” at Telecom, which has “struggled for a few years now,” Williamson said.

The company faces increased competition and pricing pressure, meaning it will be “more and more difficult to maintain margin.” The proposed split of the company to fit in with Crown Fibre’s plans “might add something.”

Fletcher Building, the biggest company on the exchange, fell 0.4% to $7.57.

Allied Farmers declined 2.4% to 4.1 cents following the finance company’s announcement that it will seek to tap shareholders for some $19.3 million in a rights issue and share placement to institutions to pay back debt.

Fisher & Paykel Healthcare fell 6 cents to $2.97 and Vector Ltd. dropped 2 cents to $2.06.

South Port New Zealand Ltd., the Bluff-based port operator, fell 1.5% to $2.64 after signaling that earnings were $3.5 million to $3.7 million, compared with earlier guidance of $3.5 million profit.

Williamson said the earnings season will likely show companies have been putting cost cutting measures in place during the downturn. There are “pockets of recovery but a lot will still be struggling.”

Opus International Consultants Ltd., the engineering firm, fell 2.8% to $1.75. The company about doubled profit in the year ended June 30 to $10.4 million on improvement at its British unit. Still, U.K. trading conditions remained "difficult," said chairman Kerry McDonald.

(BusinessDesk)

© Scoop Media