Oliver's Real Food Announces $300k Inventory Valuation Error
OLI (OLI) Share Update July 2024 Thursday 4th
Oliver's Real Food Identifies $300k Inventory Valuation Error
Oliver's Real Food Limited (ASX: OLI) has announced a significant inventory valuation error amounting to $300,000, which will impact the company's financial results for the current year.
Instant Summary:
- Inventory valuation error of $300,000 identified.
- Error occurred during internal technology upgrades between February-May 2024.
- Current quarter's cost of goods will increase, negatively impacting operating results.
- Year-to-date gross margin percentage will decrease by 1.12% annually.
Details of the Valuation Error
Oliver's Real Food Limited has revealed an inventory valuation error amounting to $300,000. This error was identified following a thorough review of the company's recent monthly management accounts. The Board of Directors raised concerns about the reported inventory valuation, prompting an investigation by management.
The error occurred during the period from February to May 2024, when Oliver's Real Food was upgrading several internal technologies, including its Point of Sale and Inventory systems. The stock valuation error was traced back to this period of technological transition.
Impact on Financial Results
As a result of the error, the company's current quarter's cost of goods will increase, which will negatively impact its operating results. The year-to-date gross margin percentage at the end of March was 64.70%, and this adjustment will reduce that margin by 1.12% on an annualized basis.
Management has conducted a full review of all current systems and has confirmed that they are now functioning correctly and in unison. The company assures stakeholders that this stock error is a one-time occurrence and will not reoccur.
Company's Response
Oliver's Real Food has taken immediate steps to address the issue and ensure the accuracy of its inventory valuations moving forward. The Board of Directors has authorized this ASX release to inform investors and stakeholders of the situation and the measures being taken to rectify it.
The $300,000 inventory valuation error will have a notable impact on Oliver's Real Food's financial results for the current year. The increase in the cost of goods will reduce the company's operating results, and the decrease in the gross margin percentage may affect investor sentiment. However, the company's assurance that this is a one-time error and the steps taken to rectify it may help mitigate long-term concerns.
Investor Reaction:
Investors and analysts have expressed mixed reactions to the announcement. While some are concerned about the immediate financial impact, others are reassured by the company's swift response and the confirmation that the error is a one-time occurrence.
Conclusion:
Investors should closely monitor Oliver's Real Food's financial performance in the coming quarters to assess the long-term impact of the inventory valuation error. The company's proactive measures to address the issue and improve its internal systems are positive steps towards maintaining investor confidence.