By Sam Boughedda
Avery Dennison (NYSE:AVY) shares plunged on Thursday after the company said in a fireside chat hosted by Bank of America that it is experiencing a "challenging" finish to the year.
Avery Dennison shares are down around 5.8% at the time of writing, adding to its share price decline this year.
AVY's CEO did state that the company expects to end the year with double-digit organic growth and double-digit EPS growth ex-currency, but revenue has been impacted in the quarter to date, off of its previous forecasts by around $100 million.
As a result, AVY is "activating its recession scenario plan" to make near-term cost reductions and protect against lower volumes.
In late October, Avery reduced its 2022 adjusted EPS guidance in conjunction with its third-quarter results and then warned two weeks later that it would likely end up at the lower end of that reduced FY range because of continued volume weakness;
Reacting to the news, KeyBanc Capital analysts told investors, "AVY's label converting customers are rapidly reducing their inventories after having over-ordered during the pandemic when these companies were experiencing considerable difficulty getting enough material from their suppliers."
"We've seen the same pattern emerge in other packaging markets we cover, with beverage cans another obvious example: customers over-ordered because of artificially inflated demand levels (thanks to historically elevated at-home consumption and unprecedented government stimulus/handouts), and are now experiencing normalizing demand patterns and are trying to work off excess inventories simultaneously," the analysts added.