The Blackmores Limited (ASX: BKL) share price tumbled 15% to $70.90 after the vitamins retailer reported another disappointing quarter of China sales.
For the full year ending June 30, 2019 Blackmores posted a net profit of $53 million on revenue of $610 million. This is down 24% and up 1% respectively, with the group blaming the soft result on changes to Chinese e-commerce laws and other distribution channels to Chinese consumers.
The group will pay a final dividend of 70 cents per share to take full year dividends to $2.20 per share on earnings of $3.09 per share. At $70.90 this places the stock on a yield of 3.1% with a 23x price to FY19's earnings multiple.
Australia and New Zealand makes up around 45% of its sales and is a saturated market unlikely to deliver strong growth, while sales in the great growth hope of China are also now falling for uncertain reasons. The one bright spot is sales in Asia (ex-China), up 30% to $107 million.
Blackmores shares are still not conventionally cheap given its price-to-earnings multiple that is normally sported by companies growing profits to some extent. As such it seems today's buyers are betting on profit growth in FY 2020 and beyond. This is quite possible especially if it sorts out its China problems, but if not the stock could have plenty more downside.
Another stock selling into China today that reported a much better result today is Treasury Wine Estates Ltd (ASX: TWE). It also offers investors exposure to the growth of the Asian middle class.
