Dignity's Stock Halves as Funeral Price Cuts to Slash Profit

(Bloomberg) -- Dignity Plc, the U.K.’s largest and only publicly traded funeral services provider, has given in to increasing pressure from smaller rivals by announcing huge price cuts that it said will slash earnings this year.

The shares plunged as Dignity said it will lower the cost of its simple funeral by about 25 percent while also freezing prices for other traditional funerals in the majority of locations. Profit in 2018 is likely to be substantially below expectations as a result, it said in a statement, sending the stock down as much as 54 percent, the most ever.

Dignity's Stock Halves as Funeral Price Cuts to Slash Profit

The company has warned investors of increasing pricing pressures several times over the past 18 months, including a warning back in November that sent the shares tumbling. Customers are “shopping around more” in an increasingly price-conscious and over-supplied industry, it said in Friday’s announcement.

Dignity’s simple funeral price in England and Wales will fall to 1,995 pounds ($2,776) plus disbursements, from an average price of 2,700 pounds in 2017, it said. About 60 percent of its business last year came from the traditional full-service funerals, priced at an average 3,800 pounds.

Online Shift

“The group is now embarking on a rigorous review to ensure that its funeral operations are organized to run more efficiently and effectively,” the company said. It expects to spend an additional 2 million pounds in 2018 on digital and other promotional activities, in what is an “increasingly online marketplace.”

The sector’s shift online has been key in driving down prices, according to Bloomberg Intelligence analyst Charles Allen. “People have been able to go and search and find the product online for less in a way they couldn’t two or three years ago.” he said.

While funeral companies aren’t subject to changes in discretionary spending, “people have worked out a way to spend a bit less,” he said.

Dignity’s shares were halted twice due to volatility on Friday morning, with the stock trading down 49 percent at 977.5 pence as of 10 a.m.

©2018 Bloomberg L.P.