The Motley Fool

Vita Group Limited shares sink 12% lower on trading update

Unfortunately for its long-suffering shareholders, it has been another day of declines for the Vita Group Limited (ASX: VTG) share price.

At the time of writing the Telstra Corporation Ltd (ASX: TLS) retail store operator’s shares are down 12% to $1.38.

Why are its shares in the red today?

This morning Vita held its annual general meeting and provided the market with a trading update and its full-year earnings guidance.

According to the release, the company expects the remuneration impacts from its negotiations with Telstra to cause an annual impact of $25 million.

While the company does aim to offset this with a $5 million cost reduction program, continued performance optimisation, increased retail information and communication technology (ICT) store numbers, and an improved business ICT channel, first-half EBITDA is forecast to come in between $16 million and $18 million.

By comparison, Vita delivered first-half EBITDA of $35 million in FY 2017.

For the full-year management expects a slight improvement in the second-half will lead to EBITDA of between $36 million and $43 million in FY 2018.

This will be a decline of between 34% and 43% year-on-year.

Should you buy the dip?

While Vita’s shares do look cheap, I would caution against an investment at this stage as things could yet get worse before they get better.

Furthermore, although the company is trying to diversify its business away from being reliant on Telstra, only time will tell whether this move is a success.

As such, I would suggest investors consider other retailers such as Premier Investments Limited (ASX: PMV) and Super Retail Group Ltd (ASX: SUL) instead.

Alternatively, here are three top growth shares that could be great long-term investments.

Top 3 ASX Blue Chips To Buy In 2017

For many, blue chip stocks mean stability, profitability and regular dividends, often fully franked..

But knowing which blue chips to buy, and when, can be fraught with danger.

The Motley Fool’s in-house analyst team has poured over thousands of hours worth of proprietary research to bring you the names of "The Motley Fool’s Top 3 Blue Chip Stocks for 2017."

Each one pays a fully franked dividend. Each one has not only grown its profits, but has also grown its dividend. One increased it by a whopping 33%, while another trades on a grossed up (fully franked) dividend yield of almost 7%.

The names of these Top 3 ASX Blue Chips are included in this specially prepared free report. But you will have to hurry. Depending on demand – and how quickly the share prices of these companies moves – we may be forced to remove this report.

Click here to claim your free report.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Premier Investments Limited, Super Retail Group Limited, and Telstra Limited. 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.

NEW. Five Cheap and Good Stocks to Buy in 2019…

Our Motley Fool experts have just released a brand new FREE report, detailing 5 dirt cheap shares that you can buy today.

One stock is an Australian internet darling with a rock solid reputation and an exciting new business line that promises years (or even decades) of growth… while trading at an ultra-low price…

Another is a diversified conglomerate trading near a 52-week low all while offering a 2.8% fully franked yield…

Plus 3 more cheap bets that could position you to profit over the next 12 months!

See for yourself now. Simply click the link below to scoop up your FREE copy and discover all 5 shares. But you will want to hurry – this free report is available for a brief time only.

CLICK HERE FOR YOUR FREE REPORT!