The Blackmores Limited (ASX: BKL) share price has taken a tumble on Wednesday.
In afternoon trade, the health supplements company's shares are down over 8% to a 52-week low of $65.51.
Why is the Blackmores share price tumbling lower today?
The weakness in the Blackmores share price today appears to have been driven by a broker note out of Morgans.
According to the note, the broker has retained its hold rating but cut its price target on the company's shares by 20% to $70.50.
What did the broker say?
Morgans made the move on the belief that Blackmores' second half of FY 2022 has been far more challenging than it was expecting. This is due to lockdowns in China and the east coast floods. It explained:
BKL's 2H22 has been challenging. In China, conditions have continued to worsen with the lockdowns in Shanghai likely impacting BKL's supply chain and sales. Guidance was for China sales in the 2H to be less than the 1H (benefits from Singles Day), but up on the pcp. We now forecast 2H22 China EBIT to be down 26% vs 2H21.
In ANZ, the QLD/NSW floods forced some pharmacies that sell BKL's products to close for an extended period. Omicron induced labour shortages impacting supply chains and manufacturing would have also negatively affected operations.
What about the future?
Looking ahead, the broker has warned that competition is heating up in the ANZ market. This follows comments out of rival Swisse, which laid out plans to win a greater market share.
Structural and competitive threats in ANZ will likely worsen in FY23. H&H (owner of Swisse) recently said it aims to increase its market share and reclaim its leadership position in key categories and channels. We think this will mean increased promotional activity and discounting in the grocery channel.
In light of the above, the broker feels that Blackmores won't be able to achieve its FY 2024 growth targets. It concludes:
Given the world has changed since BKL set its FY24 growth targets almost a year ago, we think they now look too aggressive. Both Morgans (A$99.5m) and Bloomberg consensus (A$108.0m) are well below BKL's FY24 EBIT target range of A$123.8-131.3m.
All in all, given this softer growth, the broker appears to be waiting for the Blackmores share price to fall a bit further before considering it as a buy.