British American Tobacco Shares (LON: BATS) Fall as Firm Faces Slower Vape Sales

British American Tobacco shares (LON: BATS) are trading firmly red today, down 8.72% as the firm reported it's performance update.

Several key factors are contributing to this decline. Firstly, BAT’s 2024 vape sales in the U.S. were reported to be 0.8% lower compared to the previous year. The decline in sales can be partly attributed to the presence of illicit single-use vapor products in the market, which have negatively impacted BAT's efforts in the competitive vaping sector.

Despite setting a strategic goal to become a “predominantly smokeless” business by 2035, BAT is grappling with the challenges posed by the transition. Analysts Russ Mould and Chris Beckett have highlighted these difficulties, particularly in terms of adapting to new consumer spending trends and the broader shift towards smokeless products.

Additionally, traditional cigarette sales in the U.S. have been declining with a reported fall of 10.1%, which further compounds BAT's revenue challenges. These dynamics are reflected in the company's financial results from the previous year, where vapes and new product lines contributed £249 million to BAT’s overall profit of £2.7 billion. However, the company's total turnover decreased by 5% to £25.9 billion.

Looking ahead, BAT, under the leadership of CEO Tadeu Marroco, is cautiously optimistic about a potential recovery. The company anticipates an uptick in turnover, projecting a growth of 1% in 2025.

The pressing need for BAT to navigate the complexities of a changing industry landscape remains critical as it aims to realign its portfolio and meet evolving consumer preferences.