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Shock news sends Blackmores Limited shares sharply lower

The Blackmores Limited (ASX: BKL) share price has fallen around 4% in morning trade after the vitamins manufacturer announced that its long-serving CEO, Christine Holgate, is to leave the business.

The company has delivered falling revenues and plunging profits for the nine months ending March 31 2017, although it was cycling off an exceptionally strong prior corresponding period. Holgate will reportedly leave to take up the lucrative role of CEO at Australia Post and Blackmores’ chariman Marcus Blackmore will fill her role on an interim basis.

Under Holgate’s leadership the stock has climbed more than 320% and the company will want to find a well credentialed successor (preferably with experience in Asia) before she officially departs on September 29.

For investors Blackmores is not an easy stock to value given the wild swings in sales that the company has pinned on variable demand from Australia-based wholesale Chinese buyers and others using online channels.


The shares are arguably expensive at $90.20 given the lack of certainty over sales during financial year 2018. Indeed, the stock could come under more selling pressure over the rest of 2017 if the company fails to deliver on expectations for a return to healthy growth in FY 2018.

As an investor then, I would wait until the company reports its full year results in August and provides any potential guidance for FY 2018 before considering buying shares.

However, Blackmores does have a notably long track record of sales growth as a listed company and over the long term looks to have some market-beating potantial thanks to growing demand from Asian consumers, among other things. Others to consider in the healthcare, beauty and foodstuffs space include the a2 Milk Company (Ltd) (ASX: A2M) and BWX Limited (ASX: BWX).

Of the three, a2 Milk’s a2-protein-only milk products may continue to grow sales much stronger-than-expected and it could offer some of the best returns on the ASX going forward, despite it trading on an already lofty valuation.

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Motley Fool contributor Tom Richardson owns shares of A2 Milk, Blackmores Limited, and BWX Limited.

You can find Tom on Twitter @tommyr345

The Motley Fool Australia owns shares of A2 Milk and BWX 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 Bruce Jackson.

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