The Motley Fool

The McBride share price crashed 17% today. Here’s why!

Image source: Getty Images

Wednesday was a bad day for shareholders in McBride (LSE: MCB), the British maker of own-brand household goods. On Tuesday, the McBride share price closed at 93.6p, but tanked this morning. Shortly after the London market opened, MCB shares had crashed as low as 67.8p, down more than a quarter (27.6%). However, the shares have since recovered some of their early losses and trade at 78.2p heading towards the close.

The McBride share price crashes on a profit warning

Manchester-based McBride is Europe’s leading supplier of retailer own-brand goods for household and professional cleaning/hygiene markets. It was founded in 1927 and has been continuously listed in London since 1995. It operates in 10 countries, employs 3,400 people, and had sales of over £700m in 2020. But the group has started struggling in 2021, hence the McBride share price taking a tumble today.

5G is here – and shares of this ‘sleeping giant’ could be a great way for you to potentially profit!

According to one leading industry firm, the 5G boom could create a global industry worth US$12.3 TRILLION out of thin air…

And if you click here we’ll show you something that could be key to unlocking 5G’s full potential...

At its 2021 high, the McBride share price peaked at 97.8p on 15 April, so it’s fallen back almost 20p since then. But what triggered today’s price crash? Alas, McBride released a surprise profit warning, sending its shares sharply southwards.

Today, McBride warned of “increasing input costs…for many of our raw materials” in the first quarter of 2021, with “rapid, significant and sustained price escalation” in recent weeks. McBride cautioned that it “will see further double-digit increases on average across these materials and packaging items by June 2021”. That’s more than double the input inflation it expected in mid-March, with the biggest increases falling on its liquids division. Obviously, higher input costs will eat into margins, hence the blow to the McBride share price.

McBride expects yearly profits to fall 15%

McBride went on to say that “revenue volatility continues to be a challenge in most of our markets”, with sales of household cleaners normalising from 2020’s peaks. Furthermore, it admitted that “sales of laundry and personal care products have remained very subdued”. With sales weakening, the group now expects second-half revenues to be 6% lower year-on-year. Again, that’s not exactly good news for the McBride share price.

For me, the biggest blow to the McBride share price came from the downward revision to 2020/21’s profits. In the year ending June 2021, the company expects profits to be more than a seventh (15%) lower than in the 2019/20 financial year. Then again, McBride is taking corrective and remedial action to tackle these threats to margins and profits. It has raised prices selectively, as well as accelerating cost-cutting programmes. These improvements and mitigatory actions should produce results in the second half of this calendar year.

Would I buy McBride at the current price?

At the heart of McBride lurks a decent business trying to do well. After all, own brands are very much in vogue these days. Just look at the stonking success of German discount chains Aldi and Lidl. But the group has suspended its guidance for the 2021/22 financial year due to “extreme volatility in material pricing”. That makes me nervous, so I’d hold off buying the McBride share price at 78.2p. To err on on side of caution, I’d sit tight and await the £164m company’s preliminary results announcement and outlook update in September. I’d prefer to see if the group can halt this sales slide and margin erosion before buying MCB stock!

FREE REPORT: Why this £5 stock could be set to surge

Are you on the lookout for UK growth stocks?

If so, get this FREE no-strings report now.

While it’s available: you'll discover what we think is a top growth stock for the decade ahead.

And the performance of this company really is stunning.

In 2019, it returned £150million to shareholders through buybacks and dividends.

We believe its financial position is about as solid as anything we’ve seen.

  • Since 2016, annual revenues increased 31%
  • In March 2020, one of its senior directors LOADED UP on 25,000 shares – a position worth £90,259
  • Operating cash flow is up 47%. (Even its operating margins are rising every year!)

Quite simply, we believe it’s a fantastic Foolish growth pick.

What’s more, it deserves your attention today.

So please don’t wait another moment.

Get the full details on this £5 stock now – while your report is free.

Cliffdarcy 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.

Our 6 'Best Buys Now' Shares

Renowned stock-picker Mark Rogers and his analyst team at The Motley Fool UK have named 6 shares that they believe UK investors should consider buying NOW.

So if you’re looking for more stock ideas to try and best position your portfolio today, then it might be a good day for you. Because we're offering a full 33% off your first year of membership to our flagship share-tipping service, backed by our 'no quibbles' 30-day subscription fee refund guarantee.

Simply click below to discover how you can take advantage of this.