The A2 Milk Company Ltd (ASX: A2M) share price now looks as though it's taken a page out of AGL Energy Limited (ASX: AGL) or Myer Holdings Ltd (ASX: MYR)'s books.
Shares in the ex-market darling have been trending lower since late July last year, losing more than 70% in value during this time.
Right in the middle of the decline marked the worst ever day for the A2 Milk share price, which plummeted 23.7% on 18 December from $13.26 to $10.12.
Why did the A2 Milk share price fall off a cliff?
Things went from bad to ugly for the infant formula business following the release of updated half-year and full-year FY21 guidance.
This is when A2 Milk flagged a far greater and protracted disruption to its all-important daigou channel.
The continued underperformance was driven by the flow-on effect of pantry destocking following a strong sales uplift in the 2020 third quarter and a weak retail daigou performance in Australia as a result of reduced tourism and international students.
A2 Milk would issue grim FY21 guidance which included:
- Group revenue for FY21 of NZ$1.40 billion to NZ$1.55 billion.
- Group earnings before interest, tax, depreciation, and amortisation (EBITDA) margin for FY21 of between 26% and 29%.
The new figures would imply a year-on-year revenue decline between 11.9% and 20.5%.
It only got worse from there
The A2 Milk share price would continue to fall sharply on two separate occasions.
The release of the company's half-year FY21 results on 25 February would witness a 16% tumble from $10.45 to $8.76.
This was heavily influenced by yet another guidance downgrade which expected:
- FY21 revenue of NZ$1.4 billion.
- EBITDA margin between 24% and 26%.
Just three months later, on 11 May, the A2 Milk share price would stage another double-digit decline, sliding 18.6% from $7.02 to $5.71.
Why you might ask?
Another guidance downgrade. This time, forecasting:
- FY21 revenue between NZ$1.2 billion and NZ$1.25 billion.
- EBITDA margin between 11% and 12%.
After multiple downgrades, A2 now expects FY21 revenue to decline 29% to 31% against FY20 figures. Meanwhile, EBITDA margins have tumbled all the way from 26.4% to a forecast 11% to 12%.
What to expect this earnings season
A2 Milk is expected to report its full-year FY21 results on Thursday 26 August.
With results right around the corner, here's a preview of what investors might be able to expect.
