The Bubs Australia Ltd (ASX: BUB) share price has continued its poor run and is sinking on Monday.
In afternoon trade, the junior infant formula company's shares are down 9% to a 52-week low of 31 cents.
This means the Bubs share price is now down more than 50% over the last six months.
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Why is the Bubs share price sinking?
Investors have been hitting the sell button today after Bubs releases its annual general meeting presentation ahead of the main event.
Unfortunately, that update revealed that the company's performance has deteriorated since the end of the first quarter.
At the event, Bubs' under-fire CEO, Kristy Carr, revealed that revenue is expected to be flat during the first half. That's despite the company delivering a 29% increase in revenue over the prior corresponding period during the first quarter.
Why is Bubs underperforming again?
Carr blamed the shift to a manufacturer to consumer model (M2C) in China for some of this underperformance. The M2C model aims to give Bubs visibility on where each tin of infant formula is sold to the final consumer. It expects this to help understand where to invest each marketing dollar to obtain the best return in the future.
In respect to the company's first half growth, Carr commented:
Short-term revenue growth is likely to be constrained by the transition to the new M2C model in China, and sell-through velocity of the initial high volume pipe-fill orders to new retailers in the USA. Due to this phasing, we expect 1H23 revenue to be largely consistent with prior year, with strong growth momentum to be realised in 2H23.
For the full year, management expects an improvement in the second half to lead to "healthy" full year growth. Though, this will be driven by an increased investment in resources and marketing, which is likely to put pressure on margins and ultimately its balance sheet if it continues to burn through its cash. Carr added:
Overall, we expect FY23 to deliver healthy growth in revenue and further improvements to our product margin. The business will increase its investment in resources and marketing to support the growth in demand. In 2H FY23, the business will also commence an ERP upgrade project which will bring further efficiency and automation to daily business operations.
Despite the ongoing macro challenges, and softer start to the new financial year than planned, we remain confident in achieving our long-term growth ambitions.
Given this update and the Bubs share price performance, it certainly will make the shareholder vote interesting today.
