Beacon Lighting profits fall on inflationary and cost pressures

The lighting and home furnishings specialist delivers record interim sales, but rising freight and marketing costs hits profit.

Lighting and home furnishings specialist Beacon Lighting has booked record interim sales, helped by a growing business with professional trades and builders, but rising marketing and freight costs hit margins and profit.

There was also a downturn in sales at its burgeoning US operations as that market was overstocked with lighting products, particularly in the DIY hardware sector.

Beacon said inflation was impacting selling and distribution expenses, particularly relating to freight, logistics, products and travel, while variable weather dented the sales of fans and outdoor lighting.

On Thursday, Beacon revealed record sales of $164.67m for the first half, up 8.8 per cent, but a fall in half-year net profit by 6.6 per cent to $21.07m. The dividend was kept flat at 4.3c per share and will be paid to shareholders on March 10.

Beacon shares were down 2.5 per cent to $1.98 in a higher market on Thursday morning.

In terms of outlook, Beacon said store comparative sales were holding up well for the first seven weeks in the second half, remaining close to the record sales achieved during the same period last year.

Furthermore, they were significantly ahead of sales for the same period in the second half, the company said.

Trade sales positive momentum continued into the new half year, and there were benefits from the rollout of the redesigned Beacon Trade Club to all trade customers and their referral customers. Beacon said it continued to acquire new trade products in order to offer a comprehensive range of specialist products for our trade customers.

But despite the record sales for the first half, led by same store sales growth of 6.4 per cent, its profit was sunk by inflation and costs of doing business with operating expenses up $7.34m in the half, or 13 per cent. Earnings margins slid from 23.3 per cent to 20.1 per cent.

Beacon now has 118 company stores and two franchise stores. A total of 35 Beacon Design Studios generated a sales increase of 54 per cent.

The lighting specialist has also increasingly focused on servicing the tradies market, including builders, and has built up a strong trades arm. In the December half, total trade sales increased by nearly 22 per cent and Beacon trade sales through stores increased by nearly 23 per cent. Beacon commercial sales increased by 12 per cent, while trade sales through Beacon Design Studios more than doubled.

Its burgeoning offshore retail operations saw sales in Europe and Hong Kong increase by nearly 55 per cent and 11 per cent, respectively. Beacon International USA sales to the US showrooms increased by more than 65 per cent, and accounts with new customers increased by around 44 per cent.

However, total US sales were impacted by a downturn in sales through the e-commerce channel and the US market being overstocked, particularly in the DIY hardware channel. Overall, USA sales decreased as a result.