Skip to content

CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 69% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work, and whether you can afford to take the high risk of losing your money.

Fever-Tree shares slump on profit warning

The beverage producer has cut earnings guidance following staff shortages and spiralling logistics costs

Source: Bloomberg

Shares in Fevertree Drinks PLC fell 27% last week after the company warned on profits for the full-year. At its half-year trading update, the mixer producer said it was cutting full-year profit forecasts due to labour shortages in the US and rising input costs.

Management says it now expects earnings before tax, depreciation and amortisation of £37.5 million and £45 million for the full-year. However, it is maintaining its previous revenue guidance of £355 million and £365 million.

Fever-Tree: logistical headwinds and glass shortages

The brand saw a strong performance in Europe, with revenues up 31% at constant currency rates and growing demand in the US.

However, staff shortages in the US East Coast have meant that products being shipped from the UK and sea freight costs have risen by 50% on some routes. These costs are eating into the company’s margins, while there is also a shortage of glass.

"Whilst we are seeing positive top line performance and expect to deliver good revenue growth for the full year, the challenging logistical and cost headwinds we highlighted previously have significantly worsened in recent months and we now expect them to notably impact our full year margins,” Fever-Tree’s chief executive Tim Warrillow told investors.

“The business is working on a large number of initiatives, and more closely than ever with suppliers throughout our supply chain, to mitigate the transitory headwinds and at the same time ensure we can satisfy the strong demand we are seeing in our growth regions.”

The shares rebounded by 6% on Monday to 921p.

Short-term pain for Fever-Tree

However, Warrillow said management had “more confidence than ever” in the brand’s long-term opportunity, given continuing strong demand and interest in long mixed drinks. Management also highlighted that the impact of the labour issue would be short-term.

Nevertheless, City analysts were unimpressed. Analysts at Deutsche Bank cut their price target on the shares to 900p from 3,060p, citing concerns about pressure on consumer spending. "We continue to see attractions in Fever-Tree’s long-term revenue growth opportunity,” analysts there said, “but the company’s track record of margin contraction leaves us unable to have conviction in upside from current levels.”

Meanwhile, analysts at broker RBC said they were “surprised” by the profit warning, given that the issues of logistics costs and glass shortages had been well known for some time.

They also said that the cut in earnings guidance “poses big questions over both the brand’s pricing power and long-term profit potential, in our view.”

The shares are down 63% in the past year and have lost all their lockdown gains, now trading at a five-year low after hitting a high of 2719 in December 2021. With consumer demand remaining strong, they could be a long-term buy. However, with rising inflation and input costs, things could get worse before they get better.

Fever-Tree posts half-year results on 13th September.

This information has been prepared by IG, a trading name of IG Markets Ltd and IG Markets South Africa Limited. In addition to the disclaimer below, the material on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer and quarterly summary.

Seize a share opportunity today

Go long or short on thousands of international stocks.

  • Increase your market exposure with leverage
  • Get spreads from just 0.1% on major global shares
  • Trade CFDs straight into order books with direct market access
Learn more

Live prices on most popular markets

  • Forex
  • Shares
  • Indices

Prices above are subject to our website terms and agreements. Prices are indicative only

Plan your trading week

Get the week’s market-moving news sent directly to your inbox every Monday. The Week Ahead gives you a full calendar of upcoming economic events, as well as commentary from our expert analysts on the key markets to watch.

You might be interested in…

<h3>How much does trading cost?</h3>
<h3>Find out about IG</h3>
<h3>Plan your trading</h3>

Find out what charges your trades could incur with our transparent fee structure.

Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.

Stay on top of upcoming market-moving events with our customisable economic calendar.