By Chris Nicholls

MELBOURNE: Clive Peeters has downgraded its profit guidance for FY08, as it continues to experience “worsening trading conditions” that have “deteriorated sharply in recent months”.

The downgrade means Clive Peeters now expects NPAT (Net Profit After Tax) to drop approximately $3.5 million on last year to $10.2 million instead of the 10 per cent rise to approximately $14.9 million announced in its February guidance.

Clive Peeters did qualify the guidance at the time, saying it was “subject to further deterioration in trading conditions”.

In today’s announcement, Clive Peeters managing director, Greg Smith, said, “Regrettably, trading conditions have deteriorated sharply in recent months.”

“Despite sales and profit growing in line with expectations over January and February, the market slowed slightly in March and then deteriorated sharply in April. This slowdown had continued and deepened into May,” Smith said.

Smith said sales had slowed despite Clive Peeters’ “increased and aggressive advertising programme over April and May”, confirming consumer confidence was “very weak” and conditions were “very challenging.”

The company did not see an end to this bad run in the near future, either, said Smith, as interest rate rises and the spectre of more on the horizon, as well as record food and fuel costs all hit home.

To help reduce any further impact, particularly if current sales conditions continued, Smith said the company was “intensifying efforts” to reduce operating costs for FY09, with a new program to be phased in over the next three months.

Despite the short term prospects, Clive Peeters expected medium- to long-term results would be more positive, thanks to the cost cutting schemes and a new store model pilot, which would introduce a range of new product categories, Smith said.

Further details of the new store concept were unavailable at time of publication.

Despite the overall gloom, Clive Peeters’ Sydney stores raised sales by 16 per cent in the first five months of the calendar year, which the company put down to increased staff levels and improving conversion rates.

Share trading volumes in the company today have risen to record levels on the back of the announcement.