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Garden tools maker Husqvarna hit by weak US retail market
[STOCKHOLM] Gardening machinery group Husqvarna said on Tuesday it will restructure its struggling Consumer Brands division, which makes petrol lawnmowers and garden tractors, after it slumped to a loss in the second quarter on a weak retail market in the United States.
The world's biggest maker of gardening machines reported a drop in second-quarter operating profit to 1.9 billion crowns (S$298 million) on Tuesday from 2.0 billion a year earlier, falling short of analysts' forecasts.
A swing to a loss of 37 million crowns from an 86 million profit at the Consumer Products division, which sells lawn mowers and handheld outdoor tools to mainly US households, sent Husqvarna's shares down 16 percent to 71.42 Swedish crowns by 0841 GMT.
The company blamed rising commodity prices and a "challenging U.S. retail market environment."
CEO Kai Warn told Reuters that Consumer Brands' loss in the quarter meant he no longer expected the group to reach its 10 per cent operating profit target this year, though it probably would in 2019.
"Going forward we have decided to further increase focus and efforts on premium offerings under the core brands of Husqvarna and Gardena," Warn said.
Husqvarna said the Consumer Brands division would exit lower-price segments such as petrol-powered lawnmowers and garden tractors. Its remaining business will be folded into the group's Husqvarna and Gardena divisions.
"The net sales impact for 2019 is close to 2 billion crowns but will have a favourable impact on the group's operating margin," Husqvarna said on the restructuring.
The Swedish group does the bulk of its business towards the end of the first quarter and in the second - ahead of and during peak gardening season.
While traditional petrol-driven mowers, trimmers and chainsaws account for a large chunk of Husqvarna's sales, the company is betting on strong demand growth for automatic mowers as well as battery-driven handheld tools that are greener, less noisy and vibrate less.
Asked about any impact from US-Chinese trade tensions on Husqvarna, CEO Warn said he expected some negative effects from trade tariffs this year, and an even greater hit in 2019.