Blackmores Q1 results: Daigou downturn leads to sharp sales drop

By Gary Scattergood

- Last updated on GMT

Net profit for the three months to September 30 fell from $22.6m to $12m.
Net profit for the three months to September 30 fell from $22.6m to $12m.

Related tags China

Net profits at Australian vitamin and supplement supplier Blackmores fell by 46.6% in the first quarter, with daigou sales – items bought by Chinese entrepreneurs in Australia to ship back to China – plummeting.

New e-commerce and import tax rules in China have seen daigou sales slump for several retailers, including Blackmores’ rivals Swisse Wellness.

According to Blackmores, the daigou slowdown has contributed to a $28m drop in sales in Australia. The firm still belives around 20% of its Australian sales are destined for China.

A further $17m is sales has been lost by major Australian retailers curtailing orders.

Chief executive Christine Holgate said the lower sales had affected the company’s efforts to slash operational costs.

However, she said the tide appeared to turn at the end of September.

"We entered the second quarter with an improving sales and profit trajectory, there are positive sales trends that indicate overstocking is easing, consumer demand remains robust and we have been able to capture significant new sales in China," ​she said.

"While we don't expect to match last year's exceptional performance for the full year, the board remains confident in the group's strategic focus and long-term growth prospects."

Encouraging growth

She said growth in firm’s own Chinese sales channels showed there was still plenty of demand for its products.

Overall, its own China business more than tripled, contributing $31m - up 220 per cent on this time last year.

"The rapid growth of sales through these channels is encouraging as it validates continuing demand for our products in China,"​ Holgate said.

The figures, released this morning, show that net profit for the three months to September 30 fell from $22.6m to $12m, with sales down 8.1 per cent at $149m.

Holgate also referred to the Bemore partnership with Bega Cheese, established in January this year to sell infant nutrition products across APAC, and in particular China.

Yesterday we reported how the venture had missed its sales targets​, resulting in Bega’s performance flat-lining.

Holgate said that Blackmores "stands by Bega as a partner.”

Today’s figures saw Blackmore’s share price dip to $98.65, before stabilising at around $100.

To put that into context, 12-months ago they were riding high at $200, on the back of soaring sales, driven by the daigou demand.

As Blackmores chairman Marcus Blackmore told shareholders, the swell in Chinese demand from 2014 was unexpected.

"It was almost like a present…we really didn't see it going either," he said.

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