Shares in Fever-Tree have continued to lose their fizz as investors reacted with dismay to a downgrade to full-year forecasts after a damp summer in the UK supressed first-half sales growth.
The premium tonic brand also blamed ongoing challenges in the on-trade channel for a 6% decline in UK sales to £50.9m as hard-up consumers drank less gin. Off-trade sales were flat year on year in the six months to 30 June.
A 12% fall in European sales to £44.5m also took the gloss off continued progress in the US, where the business posted 7% growth to £60.3m, extending its leadership position in tonic water and ginger beer.
Group revenues decreased 2% in the half to £172.9m, missing analyst expectations.
Fever-Tree focused on the positives for the period, highlighting a growing market share in all its key regions and pointing to “strong” summer trading in July and August.
Profits also improved, with EBITDA up 79% to £18.2m and pre-tax profits jumping from £1.4m to £13.2m. However, this was mostly the result of the cost of glass for its bottles coming down from historic highs, improved trans-Atlantic shipping rates, and a focus on efficiency and higher prices.
Shareholders concentrated more on a significant reduction in full-year revenue targets, with Fever-Tree now guiding for growth of 4%-5% versus a prior forecast of 10%.
The stock sank 10% to 777.1p (at the time of publication) as a result today. It puts shares down by more than 23% in 2024 so far and a long way off the peak 2018 price of 3,863p.
CEO Tim Warrillow said the Fever-Tree brand performed well against a tough market backdrop.
“Whilst the first half was challenging, we are controlling the controllables,” he added.
“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.”
AJ Bell investment director Russ Mould said the company’s first-half trading had been “pretty ropey” and added that blaming the UK weather was “unlikely to go down too well”.
“While it is understandable a soggy start to the summer would have dampened appetite for spirits and cocktails, the vagaries of the British climate are something Fever-Tree should be used to,” he said.
“Nearly 10 years after its IPO, the initial period when Fever-Tree was consistently beating expectations feels like a distant memory.”
Charlie Huggins, manager of the Quality Shares Portfolio at Wealth Club, noted that after an annus horribilis in 2023, 2024 was supposed to be the year when Fever-Tree sales came roaring back.
“Unfortunately, it’s not just the weather that has caused sales to lose their fizz,” he said.
“Weak consumer sentiment and a normalisation of alcohol consumption following the pandemic has impacted the whole spirits and mixer category.
“What Fever-Tree really needs to get sales fizzing is a recovery in the wider spirits and mixer category. And there is no sign of that yet.”
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