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Following is a newspaper article excerpt. 'Wesfarmers shares fall short of their Target. After sharply lowering the Target's earnings forecast, Wesfarmers shares suffered their biggest
Following is a newspaper article excerpt. 'Wesfarmers shares fall short of their Target. After sharply lowering the Target's earnings forecast, Wesfarmers shares suffered their biggest fall in almost two years. The retail conglomerate said that Target's profits had been hit by a late start to winter, clearing excess stocks, shoplifting, and restructuring costs. The discount department store expects to report earnings before interest and tax for the 2013 financial year of between $140 million and $160 million, more than 40 per cent below the $244 million reported in the previous year. 'I don't think we are surprised that earnings are weak, but the downgrade in size in Target department store chain is probably more than most were expecting,' NAB analyst Michael Bush said. 'Target has been struggling for several years, partly due to the broader consumer environment and some other Target-specific [issues].' Wesfarmers shares closed 2.87 per cent lower at $42.93. The Target announcement also pushed other retail stocks lower. The Reject Shop slipped by 3.3 per cent, JB Hi-Fi dropped by 2.9 per cent, and Woolworths shrank by 0.9 per cent. The profit downgrade came as Australian Pharmaceutical Industries hoss Stephen Roche said he could not see the retail sector improving for another 2 or 3 years Required: (a) Explain the reason for the change in Wesfarmers stock price. (8 Marks) (b) Explain what may have caused the change in the stock prices of other retail institutions
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