Acuity Misses on Q1 Earnings, Margins Down; Stock Plunges 15%

January 10 [addtoany]

ATLANTA, Jan. 09, 2018 (GLOBE NEWSWIRE) — Acuity Brands, Inc. (AYI) (“Company”) today announced fiscal 2018 first quarter net sales of $842.8 million, a decrease of $8.4 million, or 1 percent, compared with the year-ago period.  Operating profit for the first quarter of fiscal 2018 was $118.6 million, a decrease of $8.0 million, or 6.3 percent, over the year-ago period.  Net income for the first quarter of fiscal 2018 was $71.5 million, a decrease of 12.5 percent compared with the prior-year period.  Fiscal 2018 first quarter diluted earnings per share (“EPS”) of $1.70 decreased 8.6 percent compared with $1.86 for the year-ago period.  Prior year’s first quarter results included a $7.2 million gain, or $0.10 diluted EPS impact, associated with the sale of an investment in an unconsolidated affiliate.

Adjusted diluted EPS for the first quarter of fiscal 2018 decreased 3 percent to $1.94 compared with adjusted diluted EPS of $2.00 for the year-ago period.  Adjusted operating profit for the first quarter of fiscal 2018 decreased $9.3 million, or 6.5 percent, to $133.9 million, or 15.9 percent of net sales, compared with the year-ago period adjusted operating profit of $143.2 million, or 16.8 percent of net sales.  Adjusted results exclude the impact of amortization expense for acquired intangible assets, share-based payment expense, special charges for streamlining activities, manufacturing inefficiencies related to the closing of a facility, and a gain on the sale of an investment in an unconsolidated affiliate.  Management believes these items impacted the comparability of the Company’s results and that adjusted financial measures enhance the reader’s overall understanding of the Company’s current financial performance by making results comparable between periods.  A reconciliation of adjusted financial measures to the most directly comparable U.S. GAAP measure is provided in the tables at the end of this release.

Vernon J. Nagel, Chairman, President, and Chief Executive Officer of Acuity Brands, commented, “Our fiscal 2018 first quarter net sales results were below our expectations, but once again better than market level performance as initial industry data suggests that the growth rate of the Company’s key end markets in North America was down low-single digits, which was in line with previous expectations.  The year-over-year decline in our net sales of one percent was due primarily to lower sales in the home center/showroom channel and certain international sales channels, including the U.K and Mexico.  We believe the decline in the home center/showroom channel was primarily due to changes in the in-house branding strategies being deployed by certain customers for select products in certain categories, while the decline in sales in certain international markets was due to weaker demand resulting from economic and or political headwinds.  Excluding these specific sales channels, net sales increased 2 percent.”

Mr. Nagel continued, “Our profitability measures for the first quarter were solid but were impacted by continued tepid market conditions and the decline in revenue in the aforementioned sales channels.  During the first quarter, we continued to expand our industry leadership position in providing IoT-enabled business solutions with our Atrius platform now deployed across nearly 160 million square feet of indoor spaces, leveraging more than 1.6 million networked sensors.  We have accelerated deployments and increased active pilots with several of the largest U.S.-based and certain European-based retailers as well as other key vertical applications, including certain airports.”

The 1 percent year-over-year decline in fiscal 2018 first quarter net sales was primarily due to a 1 percent decrease in sales volume and a 1 percent net unfavorable change in product prices and mix of products sold (“price/mix”), partially offset by a 1 percent favorable impact from changes in foreign exchange rates.  The change in price/mix was due primarily to lower pricing on luminaires, reflecting the decline in certain LED component costs as well as increased competition in more basic, lesser-featured products.  Sales of LED-based products during the first quarter of fiscal 2018 and 2017 accounted for approximately two-thirds of total net sales.