As economic headwinds persist, firms find themselves grappling with weak consumer demand, leading to a downward revision in earnings forecasts for two prominent listed companies.
Jewellery retailer Michael Hill reported a notable downturn in revenue for its New Zealand operations, marking an 11 percent decrease over the 45-week period ending May 12th. While the company saw a modest uptick in group sales, inclusive of Australia and Canada, with a 4.7 percent increase, margins were squeezed amidst rising costs and record-high gold prices. Despite expectations for improved consumer sentiment and economic conditions in the latter half of the year, sales failed to gain momentum as anticipated, maintaining a trend similar to the first half. Intensified competition across all markets further exacerbated margin pressures, with Chief Executive Daniel Bracken citing macroeconomic forces, including higher interest rates, as contributing factors leading to sustained declines in consumer spending.
Similarly, honey exporter Comvita echoed sentiments of diminished demand, particularly from China, citing adverse effects from the partial cancellation of China’s second-largest retail festival, 618. As a result, the company revised its full-year revenue outlook to a range of $211 million to $218 million, down from the previous estimate of $225 million to $235 million. Anticipated underlying earnings also faced a downward revision to $23 million to $28 million, compared to the initial guidance of $30 million to $35 million. With the challenges encountered in 2024, Comvita acknowledged the unlikelihood of achieving its 2025 target of $50 million in underlying earnings, further underscoring the pervasive impact of weakened demand on corporate performance.
