Lark Distilling has blamed soft consumer spending and confidence for a drop in sales

Tasmanian whisky producer Lark is the latest discretionary retailer to point to soft consumer demand and confidence for a drop in sales momentum since the start of the year.

Tasmanian whisky maker Lark Distilling has blamed soft consumer spending and confidence for a dive in its sales over the last six months which will see it also book further write-offs on its full-year accounts and that on Monday triggered a 20 per cent slide in its share price.

The group, known for its world famous and award-winning whiskies, has struggled since the departure of chief executive Geoff Bainbridge last year, when The Australian revealed footage he had recorded of himself in his underwear, intoxicated and smoking methamphetamine.

After launching a strategic review of the whisky producer in May, Lark’s new CEO Sash Sharma has already downgraded the businesses’ outlook and taken a razor to some of the assets in the wake of the harsher trading realities.

Sales of its award-winning whisky looked to have slumped by more than 20 per cent since the start of calendar 2023 and the weaker consumer sentiment it has pointed to is now becoming a major theme within discretionary retail as other companies across a wide spread of sectors such as baby products, fashion, homewares, food, wine and pizza also confess to disappointing sales.

In a trading update on Monday, the ASX-listed Lark said net sales for the second half are forecast to be $7.4m, down from $9.6m in the first half, resulting in around $17m for the 2023 financial year.

Forecast sales for the fourth quarter of $3.9m reflected the impact of cycling some one-off sales in the fourth quarter last year, a more challenging trading environment and consumer confidence in general, the company said.

Other retailers and brands to issue similar earnings and sales warnings due to consumers pulling back on spending include Treasury Wine Estates, Baby Bunting, home furnishings chain Adairs, fashion retailer Universal Store, Maggie Beer Holdings, Domino’s Pizza and jeweller Michael Hill International.

Following a review of its operating model, Lark said it has identified a number of one-off items that will impact the 2023 results. Non-recurring one-off items are forecast at $2.3m, comprising previously reported one-off items of $900,000 and additional items in the second half of $1.4m.

These are made up of $800,000 in one-off staff recruitment and restructuring costs incurred to allow reallocation of resources; and $600,000 from obsolete dry and liquid goods relating to a number of non-whisky products, obsolete gift packs and termination of some R&D trials.

Mr Sharma, who had a 10-year career at whisky producer William Grant & Sons where he was regional managing director for south-east Asia and Australasia, said the write-offs were consistent with his comments in May and a strategic review that is focusing on the immediate priorities to build and fortify the business.

“We remain disciplined and focused on creating shareholder value by crafting exceptional brands that deliver against the high expectations of our consumers and customers,” he said.

“Working with our leadership team, we have identified and actioned the initiatives announced today. These decisions do not impact our focus to continue to craft and lay down the right inventory to build our domestic and export potential for Lark.

“We remain committed to building our brands, underpinned by our high-quality Whisky Bank, across every aspect of the company. Our focus remains on setting up Lark to deliver sustainable long-term success, one that creates and enhances shareholder value.

“The actions we have announced today are necessary to deliver long term growth, the future of the business and our brands.”

Further strategic plans would be revealed in September or October, Mr Sharma said.

Lark shares have fallen 30 per cent since the start of January, and are down 43 per cent over the last 12 months. The company has a whisky bank of 2.2m litres as it builds up its reservoir of aged whisky.

The group was founded by Bill and Lyn Lark in 1992 and has been crafting world-class, award-winning Tasmanian whisky for more than 30 years.

Shares in Lark plummeted 20 per cent on the earnings downgrade on Monday and later closed down 26.5c, or 16.31 per cent, at $1.36.

Originally published as Lark Distilling has blamed soft consumer spending and confidence for a drop in sales