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Investing.com — Shares in Fevertree Drinks (LON:FEVR) shed over a quarter of their value on Friday after the maker of cocktail mixers slashed its profit forecasts for the year, blaming higher input costs and its inability to hire staff in a red-hot U.S. labor market.
Fevertree said its outlook for the year had worsened markedly due to “rapid shifts in the operational and cost backdrop” in the last eight weeks, causing it to lower its gross margin forecast for the year by some 5 percentage points to between 33% and 35%.
While first-half sales were solid enough, rising 14% in constant currency terms to £160 million ($189 million), it said that higher costs had already led to first-half profit margins being lower than previously estimated, with gross margin at around 37% and EBITDA margin at 14%.
The company said it is struggling to ramp up its U.S. operations due to labor shortages. As a result, it is having to fill U.S. orders from its production sites in Britain, incurring much higher freight costs as a result. It noted that freight costs have risen 50% on key routes since the start of the year.
In addition, Fevertree said that glass availability has become “severely restricted”, and forecast another double-digit rise in glass costs in the second half, along with other cost increases and supply chain disruption.
With those problems constraining its ability to grow output volumes, the company is keeping its revenue guidance for the year unchanged at between £355 million and £365 million.
By 05:30 AM ET (0930 GMT), Fevertree stock was down 27.5% at 868.50 pence. One of the hottest growth stories in the U.K. market for the last decade, it has now lost nearly 70% so far this year, but still trades at more than 22 times trailing earnings.
