Why is the Bubs share price tumbling 9% to a 52-week low on Monday?

Bubs shares are under significant pressure again on Monday…

| More on:
A young male investor wearing a white business shirt screams in frustration with his hands grasping his hair after ASX 200 shares fell rapidly today and appear to be heading into a stock market crash

Image source: Getty Images

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

The Bubs Australia Ltd (ASX: BUB) share price has continued its poor run and is sinking on Monday.

In afternoon trade, the junior infant formula company's shares are down 9% to a 52-week low of 31 cents.

This means the Bubs share price is now down more than 50% over the last six months.

Why is the Bubs share price sinking?

Investors have been hitting the sell button today after Bubs releases its annual general meeting presentation ahead of the main event.

Unfortunately, that update revealed that the company's performance has deteriorated since the end of the first quarter.

At the event, Bubs' under-fire CEO, Kristy Carr, revealed that revenue is expected to be flat during the first half. That's despite the company delivering a 29% increase in revenue over the prior corresponding period during the first quarter.

Why is Bubs underperforming again?

Carr blamed the shift to a manufacturer to consumer model (M2C) in China for some of this underperformance. The M2C model aims to give Bubs visibility on where each tin of infant formula is sold to the final consumer. It expects this to help understand where to invest each marketing dollar to obtain the best return in the future.

In respect to the company's first half growth, Carr commented:

Short-term revenue growth is likely to be constrained by the transition to the new M2C model in China, and sell-through velocity of the initial high volume pipe-fill orders to new retailers in the USA. Due to this phasing, we expect 1H23 revenue to be largely consistent with prior year, with strong growth momentum to be realised in 2H23.

For the full year, management expects an improvement in the second half to lead to "healthy" full year growth. Though, this will be driven by an increased investment in resources and marketing, which is likely to put pressure on margins and ultimately its balance sheet if it continues to burn through its cash. Carr added:

Overall, we expect FY23 to deliver healthy growth in revenue and further improvements to our product margin. The business will increase its investment in resources and marketing to support the growth in demand. In 2H FY23, the business will also commence an ERP upgrade project which will bring further efficiency and automation to daily business operations.

Despite the ongoing macro challenges, and softer start to the new financial year than planned, we remain confident in achieving our long-term growth ambitions.

Given this update and the Bubs share price performance, it certainly will make the shareholder vote interesting today.

Motley Fool contributor James Mickleboro has no position in any of the stocks mentioned. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has no position in any of the stocks mentioned. 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 Scott Phillips.

More on Consumer Staples & Discretionary Shares

A man looking at his laptop and thinking.
Consumer Staples & Discretionary Shares

Wesfarmers share price drops 1% amid accusations of 'mafia-like' behaviour

Wesfarmers shares are having a rude return to trading this Monday.

Read more »

A team in a corporate office shares a pizza while standing around a table chatting about the Domino's share price and Pizza Hut's threat to the business
Consumer Staples & Discretionary Shares

What's Don's plan to put Domino's shares back together again?

Domino's has a new growth strategy, but are investors listening?

Read more »

Young man sitting at a table in front of a row of pokie machines staring intently at a laptop. looking at the Crown Resorts share price
Consumer Staples & Discretionary Shares

Star Entertainment share price tumbles alongside sinking revenues

ASX 200 investors are pressuring the Star Entertainment share price on Friday.

Read more »

Happy couple doing grocery shopping together.
Consumer Staples & Discretionary Shares

Why it's a good day to own Woolworths shares

It could also be a good idea to keep hold of them.

Read more »

A man holding a cup of coffee puts his thumb up and smiles while at laptop.
Consumer Staples & Discretionary Shares

Why Goldman Sachs rates Wesfarmers shares as a buy

The leading broker is a big fan of this ASX giant.

Read more »

A woman shows a friend her new spiked heel shoes on a video chat.
Consumer Staples & Discretionary Shares

Guess which ASX 300 stock popped on major shareholder buying the dip

Drama has not put this shareholder off from adding to their position.

Read more »

increasing rural asx share price represented by happy looking sheep
Consumer Staples & Discretionary Shares

Are Elders shares a bargain following Monday's crash?

Has the market created a golden opportunity to buy shares in this 185-year-old business on the cheap?

Read more »

A smiling businessman in the city looks at his phone and punches the air in celebration of good news.
Consumer Staples & Discretionary Shares

Ansell shares jump 14% amid blockbuster acquisition

Ansell is making a big acquisition and it could be a big boost to its earnings.

Read more »