Aussie whisky and liquor company Lark Distilling Co (ASX: LRK) is not raising its glasses just yet, for growing inflationary pressures on households has left fewer people reaching out for a cold one.
Lark reported a decline in its net sales for H2 FY23, forecast to be $7.4 million, down from $9.6 million in H1 FY23, resulting in a full year estimate for FY23 of approximately $17 million. For Q4 FY23, it forecasts sales of $3.9 million, reflecting the impact of cycling some one-off sales in Q4 FY22. Its downward slope forecasts are due to a more challenging trading environment and lowered consumer confidence in general. Following a review of our operating model, we have identified a number of one-off items that will impact the FY23 results.
Lark CEO Satya Sharma said, “We remain disciplined and focused on creating shareholder value by crafting exceptional brands that deliver against the high expectations of our consumers and customers. 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.”
The financial forecast for FY23 includes non-recurring one-off items of $2.3 million. This comprises $0.9 million reported in H1 FY23 and an additional $1.4 million in H2 FY23. The breakdown includes $800k for staff recruitment and restructuring, and $0.6 million for disposing of obsolete goods (some non-Whisky products) and terminating some R&D trials.
The Company, in its quarterly report for March, mentioned the impact of broader economic and industry trends in Australia. The report indicated that organic domestic sales in Q3 were down by 8% compared to the same period last year. The Business-to-Business (B2B) channels experienced a slowdown after the Christmas trading season as Australians tightened their discretionary spending, resulting in decreased demand for premium spirits. However, year-to-date organic domestic net sales showed a positive growth of 3% compared to the previous corresponding period.
Sharma added, “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.”
The Company is gearing up to reveal its road map and strategic priorities for medium- and long term success with the market, which it expects will take place sometime during September – October this year. In a bid to reinvent itself, over the past couple of months, the Company has on-boarded its new CEO, Satya Sharma, and CFO, Iain Short. Plus, diversifying its income streams, Lark received a $1 million grant from the Tasmanian Government for tourism innovation at the Pontville Distillery, with the first payment expected in June.
Alinda is a Business Reporter for The Sentiment
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