The McPherson’s Ltd share price has dropped by 35% this morning after the company reduced its first-half FY21 underlying profit forecast.
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The McPherson’s Ltd (ASX: MCP) share price has dropped by nearly 35% this morning after the company reduced its first-half FY21 underlying profit forecast range from $10.2 – $11.1 million to $6.5 – $7.5 million. At the time of writing, the McPherson’s share price is trading at $1.20 after closing yesterday’s session at $1.84.
What’s driving the McPherson’s share price lower?
The McPherson’s share price is today plummeting after the wellness and beauty supplier advised that the lower revised profit forecast is due to its key China joint venture partner, Access Brands Management (ABM), reporting sales from the 11/11 event were below expectations. 11/11 is the largest online trading event day in the world.
This has left ABM with higher than forecast inventory levels of Dr LeWinn’s products at the end of November.
McPherson’s says it is continually working with ABM to materially improve the second-half outcome through further promotional investments, and innovation in new products. Consequently the company believes its FY21 second-half sales will be stronger than the second half of FY20.
This improvement will be underpinned by a very strong growth of 40% to 50% in Dr LeWinns sales to its reseller community in calendar year 2021, the company says.
McPherson’s has, however, withdrawn its full year guidance.
What else did McPherson’s say?
The company says that the Global Therapeutics acquisition was settled successfully on 30 November 2020, marking the establishment of the McPherson’s Health and Wellness Division. McPherson’s had purchased the business from Blackmores Limited (ASX: BKL) for $27 million.
At the end of November 2020, McPherson’s had a net bank debt of around $10 million.
McPherson’s chief executive, Laurence McAllister, said this as part of today’s announcement:
We will utilise our strong balance sheet, funding capacity and sales, marketing and distribution competencies to fund bolt-on acquisitions that offer synergies, enhance and accelerate our capabilities, and complement our existing brand portfolio.
McPherson’s share price performance in 2020
In October, McPherson’s reported that its sales revenue for the first-quarter of FY21 was up 4% on the prior corresponding period to $49.7 million. This was underpinned by 8% growth in sales revenue from owned brands to $41.7 million. It also reported an 84% lift in underlying profit before tax to $2.9 million.
The McPherson’s share price has lost 51% this year, including the 35% fall today. It commands a market capitalisation of $235 million.
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Motley Fool contributor Eddy Sunarto has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of and has recommended Blackmores Limited. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.