Why the Beacon Lighting Group Ltd share price fell 9% today

It’s been a tough day for shareholders of lighting retailer Beacon Lighting Group Ltd (ASX: BLX) who have watched their shares tumble 9.3% to $1.81 after the group released its half-year earnings results.

Here are some of the highlights:

  • Record sales of $90.8 million, up 8.5% on the prior corresponding period (pcp)
  • Same store sales (SSS) up 5.1%
  • Earnings before interest, tax, depreciation and amortisation (EBITDA) up 21.4% to $17.6 million
  • Net profit after tax (NPAT) up 22.1% to $11.1 million
  • Earnings per share (EPS) also up 22.1% to 5.16 cents per share
  • A fully franked dividend of 2.3 cents per share (up 27.8% on the pcp)

The company improved its productivity during the 26-week period ended 27 December 2015, which was reflected by the group’s improved margins. Its gross profit margin was 65.9%, against 64.1% in the pcp, while its EBIT margin rose to 16.6% from 14.7%.

Meanwhile, the SSS growth of 5.1% was impressive, although it was well below the 11.7% comparative sales enjoyed in the first-half of financial year 2015 (FY15), and the 10.4% comparative sales growth recorded for the full-year. This may be part of the reason why investors responded so poorly to the group’s results today.

Notably, management did say stronger comparative sales were expected for the second half than in the six months just completed. Meanwhile, management says it will continue to pursue growth through new store rollouts, while it will also continue to enhance its online presence and product offering.

While the company believes that general market conditions remain supportive of Beacon Lighting, investors do need to watch out for a pullback in consumer confidence and housing spend. Indeed, companies like Beacon Lighting, Nick Scali Limited (ASX: NCK) and even Harvey Norman Holdings Limited (ASX: HVN) have benefited from booming property sales and prices, but a slowdown could affect their performance in the future.

Although it’s been a bumpy 12 months for shareholders of Beacon Lighting Group, the shares have still risen strongly since they made their debut on the ASX in April 2014.

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Motley Fool contributor Ryan Newman has no position in any stocks mentioned. Unless otherwise noted, the author does not have a position in any stocks mentioned by the author in the comments below. You can follow Ryan on Twitter @ASXvalueinvest.

The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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