Why Acuity Brands, Inc. (NYSE: AYI) stock is crashing

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Acuity Brands, Inc. (NYSE: AYI) stock fell over 13.14% on 2nd October, 2019 (as of 12:20 pm GMT-4; Source: Google finance) after the company posted lower than expected results for the fourth quarter of FY 19. Gross profit for the fourth quarter of fiscal 2019 fell by $17.2 million to $394.7 million compared with $411.9 million in the prior-year period mainly due to lower sales volume, which was partially offset by favorable price/mix. 2019 fourth quarter gross profit margin of 42.1 percent had expanded 330 basis points compared with prior year’s gross profit margin and 320 basis points compared with the prior year’s adjusted gross profit margin. The company reported Net income for the fourth quarter of fiscal 2019 of $96.1 million compared to $108.2 million in the prior-year period.

AYI in the fourth quarter of FY 19 has reported the adjusted earnings per share of $2.75, missing the analysts’ estimates for the adjusted earnings per share of $2.78. The company had reported 11.6 decline in the adjusted revenue to $938.1 million in the second quarter of FY 19, missing the analysts’ estimates for revenue of $1.03 billion. This sales decline is on back of 16 percent decrease in volume, partially offset by a 5 percent net favorable change in product prices and mix of products sold.  The  fall in volume is due to several factors, which included prior year’s fourth quarter significant initial stocking of product in the stores of a new customer in the retail sales channel that did not repeat in the current period, elimination of certain products in the portfolio sold mainly through the retail sales channel that did not meet the return objectives, as well as subdued market conditions.

For 2020, the company expects market demand for lighting products to remain sluggish until there is more clarity regarding these global trade issues. The fiscal 2020 first quarter net sales could fall in the mid-to-high single-digit percentage range compared with first quarter of fiscal 2019 mainly on the back of the pull forward of orders by customers in advance of announced price increases in the prior-year period as well as the recent efforts to reduce the exposure to products whose profitability has been most negatively affected due to tariffs and are sold primarily through the retail sales channel.  The decline in net sales is expected to get partially mitigated by the recently acquired The Luminaires Group. The fiscal 2020 capital expenditures are expected to be approximate 1.7 percent of net sales.

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