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Moss Bros shares plunge as it warns on 2018/2019 profit, cuts dividend for full-year 2017/18

Last updated: 14:05 21 Mar 2018 GMT, First published: 08:36 21 Mar 2018 GMT

Moss Bros store
Moss Bros said the change in current year expectations reflects stock shortfalls after a consolidation of its supplier base

Moss Bros Group plc (LON:MOSB) saw its shares plunge on Wednesday after the suits retailer warned that it expects its 2018/2019 profit to be “at a level materially lower than current market expectations” and plans to pay a reduced dividend for full-year 2017-2018.

The high street group, however, said it does not anticipate any change to the previously announced expectations for the results for the 52-week period ending 27 January 2018, which will be announced on 27 March 2018 as planned.

READ: Moss Bros issues profit warning after footfall tailed off in December

In a trading update for the 52-weeks to 26 January 2019, Moss Bros said the change in current year expectations reflects stock shortfalls after a consolidation of its supplier base in response to sterling weakness leading to material short-term issues.

The group added the stock shortfall across all categories has had a negative effect on sales in all retail channels and will continue to do so until late Spring. 

Moss Bros also said formal wear hire sales continue to be challenging, although the peak trading period for Hire is still to come, and as such, the group has remained prudent in its outlook.

The firm added that the reduction in store footfall that was experienced towards the latter part of December has continued, reflecting a more cautious consumer environment.

Dividend policy modified

The company said that, as a consequence of its revised view on FY18/19 results, the board has decided to modify its existing dividend policy to ensure that the group is able to fully cover future dividends with profits in FY20/21 and onwards.

Moss Bros added that, therefore, it will be recommending a final dividend of 1.97p, making a total dividend of 4p per share for full-year 2017/18, down from 5.89p in the previous year.

Brian Brick, Moss Bros chief executive officer, said: “In common with many UK retailers, the year ahead looks like being a very challenging one and we have taken action early to be sure we protect the underlying strength of the business.”

He added: “We do believe continued investment is essential to ensure we retain a sustainable point of differentiation and that we leverage our distinct position on the high street."

In afternoon trading, Moss Bros were off earlier lows but still down over 23% at 45p.

Liberum keeps 'hold', remains supportive of management

Analysts at Liberum Capital called the trading update “very disappointing” but pointed out that they had reduced their dividend forecast by 33% to 4p to assume a fully-covered free cashflow policy after updating their forecasts on February 27.

In a note to clients, the analysts said: “This is a disappointing move but unlike many other retailers that have constrained balance sheets and leverage issues … Moss Bros remains in strong health with cash on the balance sheet and its investment programme (particularly in eCommerce) should not be impacted.”

They added: “While risks of further cuts remain and the outlook is somewhat more uncertain, we remain supportive that this is a management team that is well positioned to steer Moss Bros through these more challenging times.“

 -- Adds broker comment, updates share price --

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