What happened
Shares of Betterware de Mexico (BWMX 0.46%) were falling today after the Mexican e-commerce company posted disappointing results in its third-quarter earnings report, with organic sales falling sharply in the quarter.
As a result, the stock was down 11.7% as of 1:20 p.m. ET.
NYSE: BWMX
Key Data Points
So what
The company, which sells home goods online in Mexico, said that revenue in its core Betterware division plunged 37% to $75.1 million, as it cited a softer-than-expected economic environment, weak consumer spending, demand normalization as the pandemic fades, and headwinds in discretionary spending.
Home goods retailers in the U.S. like Bed Bath & Beyond and Wayfair have also seen sales decline, so it's not a surprise that Betterware is experiencing similar trends.
Earlier in the year, it acquired JAFRA, a beauty and personal care company, which helped lift overall revenue 5% to $159.3 million. That was slightly ahead of estimates from the single analyst following the stock at $158.3 million.
EBITDA, however, declined by 31% to $25.4 million, and net income was nearly wiped out, coming in at just $330,000.
Now what
Betterware de Mexico had also attracted investors with its strong dividend payment, but as profits have fallen, the payout seems to be getting to be unsustainable.
In fact, the company said the board would discuss its long-term sustainable dividend policy next year, implying that the payout could get cut or eliminated entirely if profits don't improve. The current dividend yield is over 20%, but investors shouldn't trust that based on its recent performance.
If management cuts the dividend, the stock, which is already down 65% year to date, is likely to move even lower.
