Profit Warnings: They’re just not all made the same…

November 4 2016

Crawshaw & Premier Foods warned on trading in Sept & Oct respectively:

  • Negative profit (or sales) warnings are never good
  • Nor are they neutral but, even if they are all negative, some are more negative than others

Existential, business-model threatening warnings:

  • See Monetise, Jessops, Blockbuster, Woollies etc. as existentially-challenged companies
  • More recently, Crawshaw (high PER growth stock) warned on trading
  • It blamed ‘international football, adverse weather & Brexit’
  • Customers are super-cost-conscious & supermarkets have ‘aggressive meat promotions’
  • All a bit of a challenge for a High Street based, price led butcher
  • But out of town units are OK – though this isn’t why shareholders are in the stock
  • A policy flip-flop may be suspected, the raison d’etre is less clear than it was

Annoying but hopefully transient warnings:

  • Premier Foods commented in Oct that sales were sluggish
  • It would hit profit numbers by cutting media spend. Not ideal, but there is some wiggle-room
  • It blamed the weather. Every week in calendar Q3 was warmer than the same week in 2015
  • Hence, though sweet treats & exports were good, less gravy, food mixes, puddings were sold
  • The BBC, somewhat helpfully, confirmed that the warmest day of 2016 was 13 Sept

This matters:

  • Brexiters famously said they were sick of statistics, excuses & experts
  • But that risks throwing out the baby with the bathwater
  • Re PFD, Oct was cold, Nov is so-far chilly & Dec comps are soft as it was warm in 2015
  • The group (PER 5.4x) reports H1 numbers a week on Tuesday