McBride warns of “weak retail sales across Europe”

McBride Jun10.pngThe blog is a great believer in the retail sector’s ability to help us forecast chemical industry trends.

McBride is Europe’s leading ‘own brand’ in the household and personal sector. Its profit warning on Thursday of “weak retail sales across Europe“, therefore rings alarm bells. The sector is a large outlet for chemicals, and has recently seen BASF pay €3.1bn ($3.8bn) for the Cognis business.

‘Own labels’ have generally done very well in the downturn, with consumers focusing on price and value. McBride is a well-managed company, and as recently as February was forecasting continued good earnings. Now it says the current quarter will be 3% below 2009 levels.

The warning was a shock to investors (as shown in the Yahoo chart above), with the shares falling 40% after the news. And the Financial Times adds that McBride is facing “a fightback by brand owners” that includes price discounts. Clearly, the rollout of more Basic brands by majors such as P&G over the past year, is now having a serious impact.

In turn, this is going to put pressure on chemical industry volumes and margins, just as we enter the seasonally weak Q3 period.

About Paul Hodges

Paul Hodges is Chairman of International eChem, trusted commercial advisers to the global chemical industry. He also serves as a Global Expert for the World Economic Forum. The aim of this blog is to share ideas about the influences that may shape the chemical industry and the global economy over the next 12 – 18 months. It looks behind today’s headlines, to understand what may happen next in critical areas such as oil prices, China and Emerging Markets, currencies, autos, housing, economic growth and the environment. Please do join me and share your thoughts. Between us, we will hopefully develop useful insights into the key factors that will drive the industry's future performance.

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