(Bloomberg) -- Fevertree Drinks Plc shares dropped to an eight-year low as the high-end tonic maker slashed annual sales growth expectations following results that were marked by poor weather.
The company, which makes drinks such as Madagascan Cola and Italian Blood Orange Soda, now expects to achieve revenue growth of 4% to 5% for the Fever-Tree brand, down from the 10% it forecast earlier this year. “Unseasonable” weather at the start of the key summer season had hurt trading in Europe and the UK during the first half, Fevertree said.
“While we think investors largely anticipated weaker first-half figures as a result of poorer weather, the magnitude of the guidance cut, particularly in the context of improved scanner performance in July/August, will come as a surprise,” Morgan Stanley analysts Rashad Kawan and Sarah Simon wrote in a note.
Shares fell as much as 11% in London, hitting the lowest intraday level since July 2016 and extending their year-to-date drop to 26%.
Having been something of an investor darling in the years that immediately followed its 2014 initial public offering, Fevertree has lost luster as a pandemic-fueled boom in home cocktails has faded. The stock is worth less than a quarter of its 2018 closing record.
Poor weather has been a bugbear for beverage makers this summer, with the wetter-than-expected season meaning fewer people going to bars, pubs and restaurants. Carlsberg A/S volumes lagged analyst estimates, with the performance partly dragged down by western Europe, which had experienced bad weather. Meanwhile, an expected boost to beer business during a busy sporting calendar failed to materialize for Heineken NV.
‘Unseasonable’ Weather
“The first-half performance in the UK and Europe was impacted by unseasonable weather at the start of summer alongside distributor order phasing in Europe,” Chief Executive Officer Tim Warrillow said in a statement.
He nonetheless remained positive. “We’re optimistic of an acceleration of growth across the second half of the year and have seen a much more positive trading performance in July and August.”
While there was gloom in Europe, the US was a different story for Fevertree. The company said it was able to extend its market share and leadership position in the tonic water and ginger beer categories.
“The US is already Fevertree’s largest contributor to the top line, but there’s plenty of room to run, given the size of this vast market,” said Aarin Chiekrie, equity analyst at Hargreaves Lansdown. “Performance in the UK and Europe wasn’t so spritely.”
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