Just Group Forecasts Bearish Profit Margins

Submitted by Craig Strzelecki on 3 July, 2008 - 08:29

Australia's largest speciality clothing retailer announced a slash in its expected profit margins for the next year. Just Group Ltd. (JST) projected earnings per share to fall between 29.2 cents and 30.6 cents in the financial year ending July 31. This was a 12 percent cut in its 2008 forecast when it had projected bullish earnings last month itself.

The consumer spending has witnessed a considerable downfall owing to rising fuel prices and food costs. It has discouraged consumers to stay away from end of season sales as well. The projections come at the wrong time when Just Group is already facing a hostile take over from Premier Investments Limited. It has given Lew a competitive edge to re-think on its bid price. Just Group, that owns Australia's popular brands like Just Jeans, Jay Jays, and Jacqui E, has stated Lew's offer as "materially inadequate". It has urged its shareholders to resist the offer from Lew made through his listed vehicle Premier Investments Ltd.

Solomon Lew, who owns 52 percent stakes in Premier Investments, had been planning a hostile take over of the group. It had earlier offered 0.25 of its shares and A$2.05 in cash for each share of Just Group which valued the bid at A$4.02 based on today's closing price. However, he made a U-turn on the offer and stated that it is rethinking about its offer. On the other hand, Just Group had not accepted the offer considering it to be neither fair nor reasonable.

Just Chief Executive, Jason Murray, and Just Chairman Ian Pollard, reaffirmed 2010 earnings target of "at least" 40 cents per share. However, they refuse to divulge the 2009 figures which further acts as a bone of contention. Lew called for greater disclosures as Just Group sails through choppy waters.

An independent review from an expert stated that owing to current economic scenario does not materially impact long term earnings and cash flow potential of the company.

Shares of Just Group took a nose dive to close nearly 14 percent or 45 cents downs to A$2.73 wiping A$90.6 million off its market value. The afternoon session witness the stock rally down to 40 cents or 12 percent to close at A$2.78. .