The surprise came when Cavalier made its announcement on its full-year profit only five days before it is due to announce its result for the six months ended December.
The shares fell from a close of $2.30 on Tuesday to $1.88 and are likely to fall lower. As late as January 24, the shares were trading at $2.55 and Craigs Investment Partners had a price target of $2.74 a share.
In the market announcement, Cavalier managing director Wayne Chung said the company expected its tax-paid interim profit was likely to be around $3.5 million, or 59% down on the previous year's $8.5 million.
"As a result of this disappointing result for the first half and a very slow start to the second half, it is now extremely unlikely the company will finish the full year within the $8.5 million to $10.5 million tax-paid earnings guidance range provided to shareholders last November."
The November outlook was based on a gradual improvement in market conditions for the remainder of the financial year after a very difficult first quarter, with sales of broadloom carpet and carpet tiles about 20% down on the previous year, Mr Chung said.
Market conditions on both sides of the Tasman had not improved since, the uncertainties resulting from the European sovereign debt issues continuing to hold back many major commercial projects.
The subdued retail environment made it difficult to maintain sales and profit margins, he said.
"Given these difficult and unpredictable conditions, it was not possible to provide shareholders with a meaningful full-year earnings guidance update at this stage," Mr Chung said.
Craigs broker Chris Timms was surprised Cavalier had taken so long to make the announcement to the market given it was six or seven weeks into the second half of the financial year and it was so close to the release of the interim profit, which is on Monday.
However, given the continuous disclosure rules, Cavalier did need to inform the market of any material changes that could affect its share price.
Craigs had forecast a tax-paid interim profit of $3.4 million and a full-year profit of $8.9 million. It appeared the full-year profit would be well down on the forecast, Mr Timms said.
"While we expect Cavalier to benefit significantly from the Christchurch rebuild, the December 23 aftershocks are likely to cause further delays to the rebuild timetable, which is expected to start in the second half of 2012."
Craigs had downgraded its recommendation on Cavalier shares to "hold", Mr Timms said.
