Blackmores extends China momentum as online sales rise
Market darling Blackmores is on the edge of being one of the top five vitamin brands selling online in China, according to analysts, who say its sales have not been hit by demand concerns in the Asian giant.
Credit Suisse analyst Ben Levin said both the bank’s data on Alibaba selling platforms and industry feedback suggested that improving sales momentum for Blackmores’ products may have continued in December, backing up a stronger November.
“In fact, we have seen evidence that Blackmores is firmly in the top 10, if not skirting the top five vitamins brands, domestic and international, selling online in China,” he said in a client note on the company.
Mr Levin outlined that he maintained his “outperform” rating on Blackmores, highlighting that the stock was still trading around 9 per cent below its recent $119-a-share high. Shares in Blackmores last traded at $107.93.
The analyst said the share price dip was likely on negative news flow surrounding infant formula company Bellamy’s.
Bellamy’s share price has been in freefall as it struggled after over-estimating China sales in supply contracts with dairy suppliers Fonterra and Bega, leaving it with unsold stock. Its troubles led to yesterday’s axing of its chief executive Laura McBain.
“Bellamy’s update yesterday provided further evidence that its slower sales and supply chain challenges should not be treated as a sector read-through,” Mr Levin said.
“We are not observing slowing Blackmores end-market sales, although we acknowledge that Blackmores’ China selling channels are notoriously difficult to follow.”
The Credit Suisse analyst said his investment case remained underpinned by Blackmores converting its brand strength into the offline channel aided by “orange hat” registration.
He also said he expected Blackmore’s inventory position for the first half of 2017 would improve as retailer/wholesale de-stocking subsided and December quarter sales sequentially improve.
