All posts tagged industry

Zurich Insurance, Astral Foods, FirstGroup, and Bossini blame profit warnings on the weather

As shares plummet, how much longer will investors accept the finger pointing?

NYSE

Blaming the weather appears to be a long and noble tradition, supported by leaders in every industry, across the globe. Take 2016, for instance; this year, the weather has already been cited by an incredible array of business leaders for a range of spectacular losses.

Sports Direct, the United Kingdom’s largest sporting retailer, operating roughly 670 stores worldwide, was the first out of the gates. It issued a profit warning on January 8 announcing that it expected to miss its target for underlying profits due to unexpectedly warm weather over the Christmas period. That warning sent shares falling 14%. It was a real surprise after the company had just one month earlier confirmed it would hit its targets for this financial year during the reporting of its half-term results.

FirstGroup, the leading transport operator in the UK and North America, quickly followed suit, issuing its own profit warning that the floods that hit Britain over the winter had resulted in revenues falling by 9.5 percent in the third quarter and that operating profits for the year would be “slightly lowered”. Similarly, Zurich Insurance released a profit warning of an estimated 100 million further quarter business operating loss for its general insurance business as a result of the high number of claims following the British floods. Shares plummeted 9% following the release.

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Investors and the weather

investors

As financial reports are disseminated quarterly and stock performances analysed in real-time to investors, there is one determinant that the majority of companies are providing incomplete, misleading, or obscure information for. Worse, they are conveniently blaming disappointing financial results on it, and yet not employing the appropriate risk management strategies to address it. Investors deserve better.

The Chief Financial Officer in providing second-quarter results, including a profit decline of 4%, is asked to explain the disappointing results. His answer? “I hate to use the weather, but a lot of it was the weather.” “We are an industry that is susceptible to weather,” he explained further.

If you are thinking this is a mom-and-pop operation, a start-up, or a tourism operator, you would be wrong on all counts.

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