Waterford Wedgwood shares have taken a tumble following a warning from the luxury crystal and china manufacturer that its business is being adversely affected by the uncertainty ahead of a possible war in Iraq.
In a statement issued to the stock markets yesterday, Waterford Wedgwood, said that following reasonable Christmas trade, sales and profits have been under pressure in January and February and will be weaker than expected.
The shares dropped immediately after the announcement and ended the day at 25 cents, down from 29 cents as investors remain concerned about the stock.
Group chief executive, Mr Redmond O'Donoghue, said this was a time of great uncertainty for luxury branded products but that the company would still return a profit this year. "Waterford Wedgwood's performance in fiscal 2003 will show growth on the prior year. Additionally, marketing, manufacturing and sourcing strategies are in place to support strong financial performance in the years ahead," he said.
Some 50 per cent of Waterford Wedgwood's sales are to the major US store groups, which are experiencing a huge fall-off in consumer spending and are heavily discounting goods to try to encourage sales.
Federated Department Stores, which owns outlets such as Bloomingdales and Macy's, which is a large customer of Waterford Wedgwood, has been forced to issue two statements in recent months revising down its sales forecasts given the current uncertainty.
Mr O'Donoghue, said the company was in a strong financial position to withstand this downturn. It has implemented a cost reduction programme with analysts expecting this could deliver savings of €30 million this year and a further €42 million in 2004.
It is also reducing its debt levels through the generation of cashflows and has said that net debt will be in line with market expectations.
"We are facing an uncertain world but are managing the business as best we can. It is a worrying time for everyone," Mr O'Donoghue said. He added that if sales remain depressed over a long period that it would have to focus on yielding even greater savings.
In the statement the company said that as well as deteriorating US economic conditions, difficulties in other key markets such as Germany, are also having a negative impact on demand.
Brands such as Waterford, Wedgwood, Rosenthal and All-Clad have all increased their share of key markets, according to the company.
Waterford Wedgwood said that its earnings per share are likely to be in a range of between 4.5 cent and 5 cent compared with 4.25 cent in the previous year. It suggests that post exceptional pre-tax profits should be in excess of €40 million.
Analysts have indicated that they will be downgrading their earnings forecasts for the group on foot of the weaker outlook. They have said the biggest challenge for the group is the potential fallout from a war in Iraq.
