One Consumer Staples’ Stock that Wavered on ASX – YOW

Yowie Group Ltd (ASX: YOW)

Yowie Group Ltd (ASX: YOW), a global brand licensing company in consumer staples sector, initially witnessed a stock price rise of 15% on April 04, 2018, while the group reported that it is expanding distribution of its popular Yowie chocolates that are paired with kid-friendly wild animal figurines through 7-Eleven™franchise stores and CVS Health retail outlets. Particularly, the group has engaged the two-national tier-A drug and convenience chains and its chocolates will be available for purchase by the end of May at up to 8,500 of the 10,500 7-Eleven™franchise stores and 6,000 CVS Health retail outlets in 49 states. 7-Eleven is premier name and largest chain in the convenience-retailing industry while CVS Health is a pharmacy innovation company; and these stores join national retailers including Circle K, Walmart, Walgreens, Cost Plus World Market, and grocery chains such as Albertsons, Food for Less, etc. to offer the chocolates for kids with a message. The group packages the Yowie chocolate, which is created in the shape of various characters, and wrapped in foil, with limited-edition collectible animal figurines (Yowie playmates), and a leaflet profiling the animal, its habitat, food sources and threats to the animal and its environment, while the animal is color-coded to focus on aspects relating to critically endangered, endangered, vulnerable, near threatened or not threatened.

The stock price rise was, however, short-lived as YOW also released its March 2018 quarter trading update and reported that Q3 Global net sales of US$4.6 million, were down 22% versus prior corresponding period as expected, at the back of lower sales at largest customer due to entry of a major competitor  and cycling of a strong Q3 FY17 in ANZ due to significant initial orders at time of re-entry into the Australian market. Further, year to date net sales (before adjustment for one-off stock adjustment claim) of US$14.6 million were down 4% versus pcp. The group’s quarter sales were said to be resulting from expected US volatility, a competitive environment and ANZ year on year timing. YOW still aims to focus on its strategic priority of expanding distribution, with additional commitments from CVS and 7-Eleven for Q4. With the trading update, YOW stock slipped by 3% on April 04, 2018.
 

Net Sales Revenue (Source: Company Reports)
 
Meanwhile, the stock has fallen 62.26% in the last six months, as at April 03, 2018. YOW was also lately summoned for a Civil Action in the United States District Court for the Middle District of Florida by Whetstone Industries Inc and Henry M Whetstone Jr, regarding re-filing of an interference case against the Company. YOW will be incurring the ongoing legal costs, however, there is some level of uncertainty pertaining to the quantification of any cost. YOW has also been removed from All Ordinaries effective March 19, 2018. While the group aims to return to revenue growth given its strategies, total revenue for the half-year ended 31 December 2017 was US$8 million, a decrease of 16% over the previous corresponding period with EBITDA loss, before share-based payments expense, of US$4.24 million compared to US$1.18 million for the half-year ended 31 December 2016, and net loss after tax attributable to members of US$3.46 million, a decrease of 8% from the loss incurred in the previous corresponding period. YOW now expects sales performance for FY18 to be flat year on year. However, the group finds support from its distribution network in the United States, Canada, Australian and New Zealand markets; and maintains a decent balance sheet. We have a “Hold” on the stock at the current price of $0.097
 

Resetting the Organisation (Source: Company Reports)

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