Reece Limited Leads ASX Losers Amid Challenging Market Conditions

Highlights:

• Reece Limited (ASX: REH) shares dropped 7.95% to $24.45 due to challenging market conditions in FY25's first quarter.
• Group sales fell 5% to $2.2 billion, with the U.S. business seeing a 6.5% decline due to deflation and adverse weather.
• Reece forecasts pre-tax income of $300–$320 million for H1 FY25, facing continued headwinds in both Australia and the U.S. markets.

Group Sales Decline Amid Tough Market

Reece Limited (ASX: REH), a leading plumbing and bathroom supplies company, emerged as the top loser on the ASX today, with shares dropping by 7.95% to $24.45 at the time of writing. The company reported a challenging first quarter of FY25, with group sales declining by 5% to $2.2 billion. The drop in sales is largely attributed to a softer trading environment, with underlying sales volumes weakening despite recent bolt-on acquisitions in Australia and New Zealand.

Struggles in the U.S. Market

While the ANZ market remained relatively stable, Reece's U.S. business faced more significant headwinds, with sales down 6.5% in U.S. dollars. The company cited category deflation and adverse weather conditions as key factors impacting performance. CEO Peter Wilson acknowledged the tough conditions during the company's 2024 Annual General Meeting, noting that the housing markets in both Australia and the U.S. remain difficult.

Challenging Outlook Ahead

Reece forecasts a pre-tax income between $300 million and $320 million for the first half of FY25, reflecting the challenging sales environment. The company remains committed to long-term growth, continuing to invest through the cycle. However, market sentiment is cautious, with consensus ratings suggesting a sell, as analysts point to ongoing difficulties in the housing sector.

Conclusion

As Reece navigates these tough conditions, investors are wary, leading to today's sharp decline in share price. The company will need to focus on strengthening its core business and addressing market challenges to regain investor confidence.

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