Victoria trims margin guidance to grab market share
Carpet manufacturer Victoria's strategy keep growing sales and grabbing market share has put pressure on profit margins in the first half of the year.
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In what remains a challenging market, the company grew sales above 3% in the six months to 29 September and said it was "aggressively" looking to grab market share in the European carpet market and had grown sales above 5%.
Although sales have been boosted by three acquisitions in the ceramic tile market in the last twelve months, European hard flooring has seen an increase in pricing pressure, coming at a time when Victoria's installation of a new line at its Italian factory has resulted in a "significant, one-off disruption" but only a "marginal impact" on overall sales growth and margins.
Sales in Australia have fallen 4% compared to a strong comparative period last year. Directors expect benefits expansion of the luxury vinyl tile business to come through during the second half.
Sticking with management's plans to drive sales and market share via a "short-term investment in operating margin" will mean margins will be roughly 1-1.5 percentage points lower than market forecasts, though this will still be well up on last year due to organic growth and the effect on product mix from acquisitions.
"The board believes that seeking to increase market share is the correct strategy for the group at this time as, even with current market conditions, the group's year-to-date revenues are on track to exceed consensus market forecasts, and the group plans to recover the margin investment in stages over the next twelve months."