The Blackmores Ltd (ASX: BKL) share price has been in decline since December of 2015, and has lagged the rally in the S&P/ASX 200 (ASX: XJO) from the low in March this year.
Blackmores, as many readers would be aware, is one of Australia’s largest sellers of vitamins, minerals, herbs and nutrients.
The company has grown significantly since its founding in the 1930’s and listing on the Australian Stock Exchange in 1985.
However, I can think of a few reasons you should consider selling…
Three reasons to consider selling Blackmores shares
1. Lack of growth
Blackmores 2020 Annual Report detailed a distinct lack of growth.
Group revenue declined by 3% to $568 million and reported Net Profit After Tax down 66% to $18.1 million.
Australia and New Zealand, the group’s largest region by sales, reported a 14.8% decline from the prior year to $227 million.
Sales in China, where Blackmores views its greatest avenue for growth, were down 16% to $103 million. CEO Alastair Symington reasoned, “In China our business suffered from lack of product innovation and continued competitive pressure”.
Although this may be his honest opinion, it is not particularly confidence boosting.
2. Competition
Blackmores sells its products into highly competitive markets. You only need to scan the Chemist Warehouse catalogue, or walk down the aisles of its stores to see the sheer number of options on offer, particularly within the vitamin and supplement categories.
I am by no means a qualified nutritionist, however one could interpret some of Blackmore’s products as readily substituted for other and less expensive alternatives.
For example, lets compare the price of a product pictured on page 4 of Blackmore’s 2020Annual Report, Blackmores Fish Oil 1000mg 200 Capsules. At the time of writing, they are retailed for $16.49 on the Chemist Warehouse website.
A quick search reveals you can purchase Nature’s Way Fish Oil 1000mg 200 Capsules for $10.49 or Wagner Fish Oil 1000 400 Capsules for $9.74. I am in no way stating that any of these products are superior to the other, however, as a price conscious consumer I would have to question paying the hefty premium for the Blackmores offering. I could replicate Blackmore’s premium pricing in other product lines such as Vitamin D3 1000IU. In my view there will be continued pressure on Blackmores to maintain their profit margins going forward.
3. No dividend
Blackmores recently advised that no final dividend will be paid to shareholders.
Although dividends are not the be-all and end-all of investing, I certainly value them. Without confidence that the company can grow significantly, I believe there are better choices available in the market, such as those below.
