BWX share price tumbles 10% on revenue and earnings guidance downgrade

This embattled skincare company continues to struggle and has downgraded its guidance again…

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The BWX Ltd (ASX: BWX) share price is having another difficult day.

At the time of writing, the embattled personal care products company's shares are down over 10% to 21.5 cents.

Why is the BWX share price sinking?

Investors have been hitting the sell button on Tuesday following the release of a trading update from the Sukin skincare owner.

According to the release, the company has downgraded its FY 2023 guidance a little over a month after last downgrading it. This follows a lower than expected performance in both December and January.

BWX now expects:

  • FY 2023 revenue of $170 million to $190 million (from $205 million to $230 million)
  • FY 2023 EBITDA of $10 million to $15 million (from $25 million to $30 million)

What caused the underperformance?

Management blamed a number of factors on its underperformance during December and January.

One is the cash constrained environment which has impacted its ability to trade effectively and led to a temporary increase in out of stocks and a need to reduce promotions to conserve cash and protect stock levels.

In addition, the company's online businesses are struggling with higher customer acquisition costs, reduced web traffic, and product availability.

Over in the United States, the company has noted a more cautious consumer, particularly in the natural channel and online. Unfortunately, management expects this to continue.

Finally, the company's previous channel stuffing activities have come back to haunt it. It notes that this strategy continues to have an impact on profitability as it runs down customer held inventory.

One positive, though, is that it has received a waiver from its lender for its debt covenants through to the end of February. At present, BWX would be breaching these covenants if they have not been waived.

Management is in the process of securing a longer-term restructuring of its finance facilities to seek further funding in the second half.

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 no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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