Retailer Briscoes' stock was pummelled by investors yesterday after it announced the likelihood of an up to 50% fall in after-tax profit in the wake of increasingly difficult trading conditions.
Briscoes' stock was trading down 10.5% at $1.10 - just above the $1 per share listing price in December 2001 - after the announcement, and at the close of the sharemarket was down 8.94% at $1.12.
As a major retailer, Briscoes' result will be indicative of what is to come in the sector.
Briscoes' first quarter to April sales dropped almost 10% from the same period last year, while total sales at Briscoes and its Rebel Sports chain were down 6.4%, to $90.3 million.
ABN Amro Craigs broker Peter McIntyre said Briscoes was hit by a "double whammy", with both the declining sales and margins.
However, although there was a shareholder sell-down, Briscoes' plight in the face of demanding trading conditions should not have come as a surprise to investors, Mr McIntyre said.
"It was brutal trading. But this is not isolated to Briscoes. All retailers will get caught up in this," he said.
In mid-March, The Warehouse reported a 10.8% fall in operating profit to $83.29 million, in the face of similarly difficult trading conditions.
Aside from increasing interest rates and competition, Mr McIntyre said household budgets were coming under increasing financial strain and the fall in discretionary spending was reflected in retail spending.
Briscoes managing director Rod Duke said in a statement the company was trading profitably.
However, he expected a significantly lower bottom-line profit for the half-year to July - within an estimated range of $5 million to $7 million, compared to last year's $10.5 million profit.
Mr Duke said the gross margin percentage generated for the first quarter was below the margin for the same quarter last year, reflecting the continued competitiveness across the retailing industry.
