Commonwealth Bank analysts have lowered their profit expectations for Australia’s largest retailers again, based on feedback from the industry.
Equities researchers Andrew McLennan and Sam Teeger told investors this month that they had cut their gross margin forecasts for David Jones and Myer by 0.20%, after already having lowered their expectations in May.
That’s bad news for the Australian economy, which needs industries like retail and infrastructure to pick up the slack as mining investment falls.
McLennan and Teeger noted that retailers had been forced to offer discounts earlier in the year than usual, because abnormally warm autumn weather made it more difficult to attract customers into stores.
Here’s what they said:
It is now becoming more apparent that the unfavourable seasonal conditions have contributed to driving high levels of industry discounting, either to meet sales expectations or to clear out excess inventory positions.
Our industry feedback indicates further downside to margin expectations as the clearance activity continues … to be conservative, we have trimmed our 2H13 [gross margin forecasts] for DJS and MYR by 20bps, reflecting the elevated discounting activity.
The analysts expect David Jones to report a FY13 revenue of $1.905 billion, down from the $1.929 billion they forecast in May, and a profit of $94.4 million, down from $100 million.
They expect Myer to post a FY13 revenue and profit of $2.777 billion and $128.8 million, down from May forecasts of $2.784 billion and $132.9 million respectively.
That means David Jones’ year-on-year profit will fall 6.6% from $101.1 million in 2012, and Myer’s profit will fall 7.5% from $139.3m in 2012, according to CBA.
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