* Competition from Costco own-brand devices a concern
* Expects some negative customer reaction to AudioNova deal
* Shares down 7 pct
(Adds new CEO quote, analyst comment, share price)
ZURICH, May 18 Swiss hearing aid maker Sonova
missed full-year targets and lowered its sales outlook
on Wednesday, suggesting it could take some time to reap
benefits from this month's acquisition of AudioNova, sending its
shares sharply lower.
Sonova has been hurt by slower than expected growth for its
U.S. cochlear implant business and by customer Costco's
move to sell own-brand hearing aids at cheaper prices than
Sonova's devices on neighbouring shelves.
Though Sonova expects the 830 million euro ($953 million)
takeover of Netherlands-based retailer AudioNova to pay off over
time, Chief Executive Lukas Braunschweiler acknowledged that it
could lose some European customers unhappy with its expanded
role as both supplier and competitor.
"We expect, and you can see that from our guidance in the
coming year, a certain negative reaction from isolated customers
in Europe," Braunschweiler said. "The coming year will be one of
Shares in Sonova were down 7 percent at 1403 GMT, with the
day shaping up to be the stock's worst in 16 months.
The company reported sales in the year to March 31 rose 5.8
percent to 2.07 billion Swiss francs ($2.11 billion), compared
with a target of 6-8 percent target.
Constant currency earnings before interest, tax and
amortisation (EBITA) were up 1.4 percent at 430.6 million
francs, against a target of between 3 percent and 7 percent.
Braunschweiler's new guidance for 2016/17 -- sales growth of
4-6 percent and EBITA expansion of 3-7 percent -- was described
as "weak" by Berenberg analysts, who listed customer
disenchantment with Sonova's retail acquisition strategy,
recession-plagued Brazil and problems at Costco among the
company's main woes.
"Costco is a concern, as this had been a key growth driver
and Sonova appears to be losing ground to the new own-brand,"
Berenberg's Tom Jones wrote in a note.
Braunschweiler said that prices for Costco's
Kirkland-branded hearing aids were recently cut by a further
$200 to $1,800. Sonova's Phonak Brio model at Costco can cost
Even so, Braunschweiler said that Sonova cannot abandon
supplying hearing aids through Costco because margins from those
transactions exceed those of Sonova's other U.S. retail outlets.
"We have to be a part of this channel because it is
growing," Braunschweiler said. "But there's the question of how
we position our products, and there are ongoing discussions with
Costco about how we'll do this."
(Reporting by John Miller; Editing by David Goodman)