Shares in health and vitamins company Blackmores took a hammering yesterday after it became the highest-profile corporate victim (so far) on the ASX from China’s coronavirus crisis with news yesterday of a sharp fall in expected earnings and the dumping of its interim dividend.
Blackmores' earnings guidance remains in place but the revenue mix is likely to be materially different than normal, the broker suggests. Supermarkets and pharmacies remain open, but sales will shift to virus-related products and away from other categories. The broker assumes the net impact on profit will be minimal.
The good news is that Blackmores' new strategy seems sensible and it might actually turn around the company's operational performance, comment analysts at Citi. They still need to see evidence of tangible improvement before turning more positive on the stock.
Reports suggest Australia's flu season is extensive and well ahead of any of the previous five years at this early stage. Morgan Stanley believes this will translate into strong support for sales in the fourth quarter of FY19 and first quarter of FY20.
March quarter results were weaker than Morgans expected, with net profit down -47%. Fewer trading days, more normalised trade spending and increased marketing and investment were evident to the broker.