Shares in toy, games and giftware designer Character (CCT:AIM) crashed 19% lower to 562.5p on Wednesday as the New Malden-headquartered company downgraded annual earnings guidance due to a combination of supply chain disruption and rising costs.
The developer and distributor of toy products based on top brands including Peppa Pig, Fireman Sam and Goo Jit Zu warned underlying pre-tax profit for the year to August 2021 is now expected to ‘decrease by no more than 10%’ of market expectations.
Before today’s announcement, consensus called for pre-tax profits of around £12 million on £140 million turnover from Character, which said the reopening of brick and mortar retail in many markets had had ‘a buoyant impact on sales generally’, with many of its brands outperforming management expectations in the second half.
SUPPLY CHAIN GRIEF
Unfortunately for Character, full year profits have been impacted by ongoing delays at ports, shipping and container shortages as well as ‘exponential increases in freight rates’.
Character also bemoaned the escalating costs of inland transportation costs in the UK and also in China, where production costs have risen due to higher raw material and wage costs.
‘The immediate outlook for an early improvement in supply chain efficiency to ensure timely fulfilment is currently unclear,’ cautioned Character.
The company stressed that its ‘determined and unswerving dedicated teams’ have all ‘worked extremely hard in tackling the logistics problems from the Far East, to focusing on getting product containers delivered to our warehouses, and onward deliveries to our customers.’
ORDERS REMAIN STRONG
Although today’s profit downgrade is a setback, Character is sitting on a ‘sizeable’ cash balance and insisted the reception to its product portfolio for the new calendar year has ‘once again been very positive’ with ‘order levels remaining strong’.
Overall, the company believes it is ‘in great shape to address the opportunities and challenges that lie ahead’.