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WD-40 Tumbles as Pandemic Disrupts Supply Chain

WD-40 stock fell sharply after reporting earnings and noting that supply chain issues hurt its ability to meet customer demand in its fiscal second quarter.

Shares of WD-40  (WDFC) - Get WD-40 Company Report plummeted Friday after the company reported a rise in fiscal second-quarter earnings and revenue but was unable to meet user demand in the U.S. due to supply chain disruptions caused by the pandemic.

Shares of the San Diego-based company fell 14.41% to $264.91 at last check in their biggest one-day, intraday drop since April 2020.

The maker of the popular WD-40 lubricant spray reported earnings of $17.2 million, or $1.24 a share, up 20% from $14.3 million, or $1.04 a share in the year-ago period.

Revenue for the quarter ended Feb. 28 rose 11.9% to $111.9 million from $100 million in the year-ago period. 

"We continue to experience very high demand for our maintenance products due to renovation trends associated with the pandemic, or what we call isolation renovation," said Garry Ridge, chairman and chief executive officer, WD-40 in a statement. 

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"In addition, we are seeing improved market conditions due to a reduction of COVID-19 lockdown measures in many markets, particularly in China, as well as increased sales through the e-commerce channel," Ridge added. 

"However, the pandemic has also caused some disruptions and constraints to our supply chain, primarily in the Americas, which impacted our ability to meet the increased end-user demand we experienced in the United States during the second quarter," he said.

WD-40 raised its revenue guidance, with Ridge saying the company expects net sales to increase to between $445 million to $475 million for the full fiscal year.

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Analysts at Jefferies said in a note on Friday that they expect a slowdown in revenue growth as remodeling trends stagnate in the second half of 2021.

“Adverse weather and third-party labor shortages are an ongoing sales headwind in the Americas, and the company is unable to meet regional demand,” Jefferies wrote.

Jefferies analyst Daniel Rizzo reiterated a hold rating on the stock but raised his price target to $280 from $250.