May 18, 2016 / 6:25 AM / 3 years ago

Sonova misses targets as Costco, cochlear implants hurt results

An employee picks microphones as she works in the production facility of Phonak hearing devices of Swiss hearing aid maker Sonova at the company's headquarters in the village of Staefa east of Zurich September 5, 2012. REUTERS/Michael Buholzer

ZURICH (Reuters) - Sonova (SOON.S) on Wednesday missed full-year sales and profit targets that the Swiss hearing aid maker had already cut last year as cochlear implant sales remained sluggish and big U.S. retailer Costco slashed prices on its own-brand products.

Sales in local currency rose 5.8 percent to 2.07 billion Swiss francs ($2.11 billion) in the company’s fiscal year to March, it said in a statement, behind Sonova’s 6-8 percent target. Constant currency earnings before interest, taxes and amortization rose 1.4 percent to 430.6 million francs, compared to its 3-7 percent goal.

Income after taxes fell to 345 million francs, from 368 million francs in 2014/2015.

Sonova fell short as results were dented by a U.S. cochlear implant business that has not shifted from children to adults as quickly as anticipated and by customer Costco’s (COST.O) focus on its own Kirkland-brand hearing aids at prices that Sonova’s devices struggled to compete against.

“Costco has changed the strategy with Kirkland, they lowered the end user price by another $200 for two instruments, so they are down now from $2,000 to $1,800 for two fully fitted instruments, and that’s a brutal low price,” said Sonova Chief Executive Officer Lukas Braunschweiler in an interview.

This month, Sonova said it was buying Netherlands’ retailer AudioNova as it seeks to revive momentum and counter threats from rivals such as Signia, William Demant WDH.CO and GN Store Nord (GN.CO), which are also buying retailers where they remove competing products from the shelves.

For the current year, Sonova expects sales to grow in the range of 4 to 6 percent and EBITA to increase by 3 to 7 percent, both measured in local currencies.

Sonova’s shares were seen falling 2.4 percent in Zurich, according to premarket indicators.

Reporting by John Miller, editing by Louise Heavens

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