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BAT warns over surge of illegal disposable vapes as US sales fall

British American Tobacco, the maker of Lucky Strike and Dunhill cigarettes, has warned that dwindling cigarette sales in the US and the surge of illegal disposable vapes could lead to lower sales and profits.

Despite some early signs of economic recovery, Americans “remain stretched” and cigarette sales across the US industry are down 9% so far this year, according to BAT. The company expects its revenues and adjusted profit from operations for the first half of the year to be down by low single digits compared to a year earlier.

Tadeu Marocco, the chief executive, said:

Our guidance also reflects ongoing macro-economic pressures, particularly in the US market and continued lack of effective enforcement against the growing illicit vapour segment.

Hargreaves Lansdown analyst Darren Nathan said:

British American Tobacco’s trading update noted that combustible volumes in the US were down a hefty 9%. Nonetheless, underlying full-year growth guidance for low-single-digit revenue and adjusted profit from operations growth remains unchanged.

This will be second-half weighted, so there’s an element of wait-and-see in terms of new product launches and US commercial initiatives. A strong performance from brands such as Lucky Strike is helping to gain volume share in the US and other territories.

Meanwhile, the emphasis in new categories such as vapes is moving from revenue to profit growth, but the use of illicit single-use vapes in the States remains a problem and the group has called for stronger enforcement of regulation.