Waddell & Reed shares tumble because of 22 percent earnings drop, investor withdrawals

A 22 percent drop in earnings and continued outflows of investors’ dollars pushed down shares of Waddell & Reed Financial Inc. 14.4 percent Tuesday.

Shares lost $3.81 and closed at $22.69 after the morning earnings report.

The Overland Park-based mutual fund company also announced the retirement of Michael Avery, its president, who joined the company in 1981. Avery, who has been a co-manager of the asset strategy funds, will retire at the end of June. Other co-managers will continue to lead the funds after Avery retires.

Waddell & Reed said it earned $62.9 million, or 76 cents a share, in the fourth quarter of last year, compared with $80.9 million, or 97 cents a share, in the final months of 2014. Revenue of $361 million was down 9 percent from a year ago.

Chief executive Hank Herrmann said the company has struggled with customer withdrawals and a volatile stock market. He also promised cost cutting to help boost earnings.

“In addition to market challenges, we have had to manage increased redemption pressure and weaker sales in some of our key strategies due in part to underperformance in these funds. In light of lower levels of assets under management, we are evaluating operating expenses to align our cost structure with revenues,” Herrmann said in the announcement.

Waddell & Reed managed $104 billion at the end of 2015, down 2 percent from the end of September. The company’s asset strategy and high yield income funds have seen large declines in the amount of money they manage.

A year ago, Waddell & Reed managed $123.65 billion.

Herrmann said that in addition to cost cutting, the company will provide a “major upgrade” to its adviser sales channels. Unlike most fund groups, Waddell & Reed employs its own brokers.

For all of 2015, earnings totaled $245.5 million, down 21.6 percent from 2014.

This story was originally published February 2, 2016 at 8:32 AM with the headline "Waddell & Reed shares tumble because of 22 percent earnings drop, investor withdrawals."