Key Points
- Net revenue fell 4% year over year due to lower shipment volumes.
- Rising production costs contributed to net income falling 9.8% to $52.3 million.
- Management revised down volume guidance for the full year.
Beverage specialist Boston Beer (SAM 0.96%)reported Q2 2024 earnings on Thursday that showed a 4% decrease in net revenue year over year to $579.1 million. Net income came in at $52.3 million, marking a 9.8% year-over-year decrease that highlights ongoing cost issues. Despite the drops, Boston Beer saw a slight improvement in its gross margin.
Overall, the quarter was a disappointing performance with some notable declines.
| Metric | Q2 2024 | Q2 2023 | Change (YOY) |
|---|---|---|---|
| Net revenue | $579.1 million | $603.3 million | (4.0%) |
| Net income | $52.3 million | $58.0 million | (9.8%) |
| Gross margin | 46.0% | 45.4% | up 60 bps |
| EPS | $4.39 | $4.72 | (7.0%) |
Source: Boston Beer. YOY = Year over year.
Company Overview and Focus Areas
Boston Beer specializes in producing and selling alcoholic beverages, including flavored malt beverages, hard seltzer, craft beer, hard cider, and spirits RTDs (Ready-to-Drink). Its flagship brands include Samuel Adams, Twisted Tea, and Truly Hard Seltzer. Recently, the company has focused on product diversification and innovation, aiming to stay relevant in a competitive market.
The critical factors for its success include expanding its product lines, maintaining a strong market position in premium segments, enhancing its distribution network, managing its supply chain efficiently, and leveraging strategic alliances.
Quarterly Highlights
The 4% revenue drop in Q2 can primarily be attributed to lower shipment volumes. Shipment volume for the quarter was approximately 2.2 million barrels, a drop of 6.4% from the previous year. While Truly Hard Seltzer underperformed, Twisted Tea and the newly launched Sun Cruiser brand showed promising growth.
Boston Beer's gross margin improved slightly, rising to 46% from 45.4% in Q2 2023 due to price increases and procurement savings. It was also affected by higher brewery processing costs and inflationary pressures.
Net income decreased to $52.3 million, down 9.8% year over year. This decline can also be tied to higher costs and decreased shipment volumes. The company continued to grapple with higher brewery processing costs and increased inflationary pressures, which weighed on profitability despite some operational improvements.
On the product front, the company saw resilience in its Twisted Tea brand, which helped offset some of the declines in other segments. Innovation remained a key focus, with new launches such as the Sun Cruiser brand contributing positively.
The company also struggled with low inventory levels, averaging about three and a half weeks on hand compared to its target of four to five weeks, highlighting distribution inefficiencies.
Looking Ahead
Management maintained its full-year GAAP EPS guidance of $7.00 to $11.00, reflecting confidence in long-term growth despite near-term challenges. However, volume guidance was revised downward to reflect a flat or low single-digit decline in depletions and shipments.
Investors should keep an eye on the effectiveness of the company’s ongoing product innovations and strategic alliances. Additionally, how well the company manages inventory and navigates current market conditions will be crucial for its performance in the coming quarters.
