The share price of IG Design (LSE:IGR) crashed 30% this morning following the publication of its latest trading update. The creative & crafts product manufacturer’s performance has been relatively flat over the last 12 months. Consequently, this morning’s nosedive has pushed the stock’s return over the past year to around -30%. So what happened?
The IG Design share price vs supply chains
Despite what the movement of the share price would indicate, sales have continued to climb. In fact, the revenue for the first half of its latest fiscal year from March increased by 11% versus the 5% achieved in 2019. Moreover, management predicted that this growth will climb even higher over the next six months and well into its 2023 fiscal year.
Usually, this would be good news for the IG Design share price. But unfortunately, Covid-19 has other plans. The pandemic may be slowly coming to an end. However, it continues to wreak havoc on global supply chains. This disruption has significantly increased sea freight, materials, and labour costs for the business.
Consequently, operating margins during the last three months have been adversely affected. And this external problem is expected to continue well into next year. Currently, it’s unknown exactly how severe the impact will be. But management has stated that full-year operating margins could fall by 1.75%-2.25%. Given that margins for its 2021 fiscal year came in at 2.3%, this forecast indicates that profits may be about to evaporate.
With that in mind, the collapse of the share price is understandably being triggered by investors jumping ship.
Zaven Boyrazian has no position in any of the shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.