Has the hard seltzer tree gone flat? Boston Beer stock plummets as expected Real sale won’t materialize
After hitting record stock prices on high expectations for alcoholic seltzer drinks, Boston Beer Co. Inc. Thursday flat and executives admitted they had “overestimated the growth of the hard seltzer category”.
Boston beer SAM,
maker of Sam Adams beer and Truly-branded alcoholic teas and seltzers, reported a second-quarter earnings drop and significant earnings misses Thursday afternoon, and executives lowered the annual forecast they had inflated just three months earlier, as the stock rocketed to records. Shares fell more than 15% in after-hours trading, which would wipe out more than $1.8 billion in market cap if the declines hold into Friday’s trading session.
Executives explained that high expectations for hard seltzer — a category that has exploded since White Claw hard seltzer quickly became popular two years ago — was a major contributor. Jim Koch, the company’s founder and chairman, said in a statement that “the hard seltzer category and the overall beer industry were softer than we expected.”
“The growth of the hard seltzer category was negatively impacted by several developments: (1) a slower growth in household penetration as the market matures and there are fewer new trials, (2) a gradual transition from volume to production. premise channel as the more mainstream option in that channel, (3) new retail hard seltzer brands resulting in a proliferation of choice and consumer confusion, and (4) a challenging comparative period of significant inventory load related with on-premise restrictions in Q2 2020,” said Koch.
Boston Beer reported second-quarter earnings of $59.2 million, or $4.75 per share, from $4.88 per share a year ago. Revenue increased 33.3% from a year ago to $602.8 million. That was well below analysts’ forecasts, who called for average earnings of $6.60 per share on revenue of $657.6 million.
For the full year, Boston Beer executives now expect earnings of $18 to $22 per share, after previously forecasting $22 to $26 per share. The new forecast is actually lower than the outlook executives had before raising it along with first-quarter earnings; the previous forecast was $20 to $24 a share.
“We overestimated second-quarter hard seltzer growth and demand for Truly, which negatively impacted our volume and earnings for the quarter and our estimates for the remainder of the year,” said Chief Executive Dave Burwick. . “We increased our production of Truly to meet our summer peak and had lower than expected demand for certain Truly brand styles, leading to higher than planned inventory levels at our breweries and increased supply chain costs and complexity. ”
After hitting those record highs after the latest earnings report, Boston Beer shares have struggled, dropping 24% in the past three months as the S&P 500 index SPX,
won 5.4%. However, the stock is still up 42.7% over the past year.