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Why the Bubs (ASX:BUB) share price is down 5% to a multi-year low

The Bubs Australia Ltd (ASX:BUB) share price is sinking lower again on Monday morning. Here’s why it has fallen to a multi-year low…
The post Why the Bubs (ASX:BUB) share price is down 5% to a multi-year low appeared first on The Motley Fool Australia. –

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The Bubs Australia Ltd (ASX: BUB) share price is sinking on Monday morning.

In early trade, the infant formula company’s shares are down 5% to a multi-year low of 35.5 cents.

This latest decline means the Bubs share price is now down 40% year to date.

Why is the Bubs share price sinking?

Investors have been heading to the exits this morning following the release of an update from one of its larger rivals.

Earlier today, A2 Milk Company Ltd (ASX: A2M) downgraded its FY 2021 guidance for the umpteenth time due largely to weakness in the daigou channel and significant inventory issues.

It is now targeting revenue of NZ$1.2 billion to NZ$1.25 billion for FY 2021 with an earnings before interest, depreciation and amortisation (EBITDA) margin of 11% to 12% (excluding MVM transaction costs). At the mid point of its guidance range, this will be EBITDA of NZ$140 million, down 74.5% on FY 2020’s result.

This compares to its previously downgraded guidance of revenue of NZ$1.4 billion and an EBITDA margin of 24% to 26% (excluding acquisition costs). It is also a long way from its original guidance of “strong revenue growth” and an EBITDA margin of 30% to 31%.

Unfortunately, management warned that it could take some time to rebalance inventory levels and restore channel health.

Judging by the performance of the Bubs share price today, this appears to have spooked investors. They may now be concerned that its own recovery could take longer than hoped as well.

Bubs’ appointment

As a result of the above, news that the company has made a new executive appointment has been overshadowed and failed to have a positive impact on the Bubs share price today.

That appointment sees Fabrizio Jorge join the company as its new Chief Operating Officer.

According to the release, Mr Jorge brings 24 years of experience in the global consumer goods and dairy industry. This includes nutritional and specialty milk powders.

Most recently, he was the General Manager for Fonterra Brands for Thailand, Laos & Myanmar. Previously from 2016 through 2020 he held full P&L responsibility for Fonterra Australia’s Ingredients business with sales to over 50 export markets. This followed a long association with Fonterra going back to 2009 covering South East Asia sales, Fonterra’s South America Ingredients operations, and as Product General Manager for nutritional and specialty formulated milk powders based in New Zealand.

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James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. owns shares of BUBS AUST FPO. The Motley Fool Australia owns shares of and has recommended A2 Milk. The Motley Fool Australia has recommended BUBS AUST FPO. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

The post Why the Bubs (ASX:BUB) share price is down 5% to a multi-year low appeared first on The Motley Fool Australia.

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