Tobacco Stocks Head for Worst Day in Five Months

(Bloomberg) -- Tobacco stocks were on pace for their biggest drop in five months after industry data showed a worsening slump in cigarette volumes.

The 11.2% decline in cigarette volumes for the four-week period ended May 18 looks “dire” and will only get “gradually less bad” for the remainder of the year, Citi analyst Adam Spielman wrote in a research note. He expects a drop of 6% for the year, worse than the 4%-5% projected by Altria Group Inc.

Altria and peer Philip Morris International Inc. fell more than 4% at their lows in New York trading on Tuesday. The two-member S&P 500 Tobacco Index was on pace for its biggest drop since Dec. 18. In Europe, British American Tobacco Plc lost 3.3% and Imperial Brands Plc fell 2.4%.

The tobacco sector is also grappling with a tough regulatory and legal environment for alternative products they claim are less harmful than traditional cigarettes, including e-cigarettes and vaping devices such as Juul and IQOS. Separate industry data compiled by Bloomberg Intelligence showed a 111% surge in retail sales for e-cigarettes over a four-week period compared to the prior year, analyst Kenneth Shea wrote in a note.

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