Sanderson Design Group (LSE: SDG) saw its share price crash by 20% on 27 June, dropping to 82.5p. The company specializes in upmarket wallpapers, fabrics, and other interior decor. The stock had been performing well in 2021, but has since lost 63% of its value from its peak and is down 5.5% over the past five years.
The crash was triggered by a profit warning, with the company citing deteriorating UK trading conditions as the reason for lower sales. Total brand product sales fell 9% in the first 22 weeks of the year, with UK sales dropping by 14%. As a result, the company expects its profits for the year to be around £8 million, below earlier expectations.
Despite the setback, Sanderson Design Group remains in a strong cash position with net cash of £16.3m as of 31 January. The company plans to accelerate cost-saving measures in response to the challenging market conditions. Investors will have to wait until 31 July for a first-half trading update to see how the company is faring.
Prior to the profit warning, the forecast P/E ratio was 14, which may be adjusted to around 10 when accounting for the net cash. Additionally, there is a forecast dividend yield of 4.2%, but the company’s cost-saving measures may impact dividend payouts. The luxury home decor market is considered risky, but potential opportunities may arise when interest rates decrease.
While the recent drop in share price may present a buying opportunity, investors should wait for the interim figures before making any decisions. It is important to consider all factors before investing in penny shares like Sanderson Design Group.