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Pharma Group API’s Profit Dip Adds to Retail Gloom

A spate of profit downgrades among the nation’s listed retailers showed no sign of slowing after pharmacy group API yesterday advised that its full-year profit would be up only 5 per cent.

The company, one of Australia’s largest pharmaceutical distributors under the Priceline and Soul Pattinson Chemist banners, issued the warning as reporting season begins, adding to pessimism around the retail sector.

API had told shareholders to expect profit growth of 10 per cent for fiscal 2017, but that forecast has now been halved despite the company maintaining market share.

API is the latest retailer to issue a profit warning on the back of souring trading conditions, with Myer, The Reject Shop, Godfrey’s, Adairs, footwear company RCG, Oroton, Bellamy’s and car retailers AP Eagers and AHG all lowering earnings forecasts.

Listed food chain Oliver’s Real Food this week issued a profit warning only five weeks after it listed on the ASX.

API said its pharmacy distribution business remained on track to meet expectations for the year and the company expected reported net debt to be positive before December 2017.

“While we continue to see good market share results, solid growth in transactions across our network at 4 per cent up on fiscal 2016, and the roll out of new stores has remained on track, overall like-for-like sales have weakened due to consumers spending less per basket and on lower value items,’’ said new API chief executive Richard Vincent.

He said API was experiencing similar consumer sentiment to that reported by other retailers.

API earlier this year unveiled a 27.2 per cent lift in half-year profit to $29.1 million for the six months to February 28, driven by a focus on service and innovative products and a better loyalty scheme. But at the time of the interim results the slowdown in consumer spending was showing, with same-store sales growth at Priceline Pharmacy stores subdued at just 0.4 per cent.

Mr Vincent said then that consumer confidence was brittle.

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