At time of writing, the share price of Blackmores Limited [ASX:BKL] is down 1.68%, trading at $88.19.
It has been a mixed year for the Blackmores share price, with slowing Chinese growth impacting its performance:
The latest news out of the company is the release of its third quarter results which reveal a 43% drop in profit.
Lower profit and revenue for Blackmores
The announcement outlined two key stats. Namely, Blackmores’ profits for the past quarter had decreased by 43% to $10 million, and its revenue had decreased by 4% to $141 million on the prior corresponding period.
Despite the decreases in profit and revenue, Interim CEO Marcus C Blackmore AM stressed the importance of a new savings initiative aimed at delivering margin improvement by cutting $60 million from the company’s costs.
The company also noted that, ‘The implementation of the new China Ecommerce Law (PRC Electronic Commerce Law) during the quarter resulted in lower sales to Chinese consumers through Australian retailers as daigou and C2C sellers review their operating models.’
It went on to say that by their estimates, sales to Chinese consumers were down 6% on the prior corresponding period.
Will the Blackmores share price recover?
The Chinese market can sometimes be difficult for foreign firms to navigate given regulatory hurdles that exist within the country.
But, with China in the process of rolling out tax-cuts, this may play a role in the revival of Blackmore’s Chinese sales as consumers have more disposable income on hand — something that is particularly relevant for wellness products.
It is also experiencing significant growth in its ‘other Asia’ segment and is moving to support daigou (personal shoppers that ship foreign products back to China).
Overall, if we are talking long-term, it is hard to bet against China — it’s always been an economic juggernaut.
The most recent earnings report, though a worry, can be rectified with time.
Blackmores has all the hallmarks of a ‘hold’ rating.
For Money Morning