Boston Beer Company ((SAM)) has held its Q3 earnings call. Read on for the main highlights of the call.
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The recent earnings call for Boston Beer Company presented a balanced view of the company’s performance. While there were notable achievements such as significant margin expansion and strong performance from the Sun Cruiser brand, the company also faced challenges with declining sales in Twisted Tea and Truly Hard Seltzer, along with a revenue decline in the third quarter.
Strong Margin Expansion
Boston Beer Company achieved a gross margin of 50.8% in Q3, marking the highest level since 2018. This impressive margin expansion was driven by procurement savings, improved brewery efficiencies, and a favorable product mix.
Sun Cruiser Performance
Sun Cruiser has rapidly grown to become the fourth largest brand in the ready-to-drink (RTD) spirits category. The brand has seen significant distribution expansion and high velocities, contributing positively to the company’s portfolio.
Operating Cash Flow and Share Repurchase
The company generated over $230 million in operating cash flow during the first nine months of the year. This strong cash flow enabled Boston Beer to repurchase $160 million in shares year-to-date, reflecting a commitment to returning value to shareholders.
Improved Internal Production
In the third quarter, 90% of Boston Beer’s domestic volume was produced internally, up from 66% in the same quarter last year. This shift has contributed to improved margins and operational efficiencies.
Decline in Twisted Tea Sales
Twisted Tea sales declined by 5% in dollar sales, losing share in the flavored malt beverage (FMB) category. Economic pressures on Hispanic consumers and competition from RTD spirits have significantly impacted sales.
Truly Hard Seltzer Challenges
The overall Hard Seltzer category saw a 4% decline in the third quarter, with Truly Hard Seltzer losing market share. This reflects broader challenges within the category.
Q3 Revenue Decline
Boston Beer reported an 11.2% decrease in revenue for Q3, primarily due to lower volumes. Despite increased pricing and a favorable product mix, the decline in sales volumes impacted overall revenue.
Shipment Decrease
Shipments decreased by 13.7% in Q3 compared to the previous year. This decline was primarily driven by reduced sales in Twisted Tea, Truly Hard Seltzer, and Samuel Adams brands.
Forward-Looking Guidance
During the earnings call, Boston Beer provided forward-looking guidance, highlighting a 3% decrease in depletions for the first nine months, compared to a 4% decline in the overall beer industry. Despite shipment challenges, the company achieved a gross margin of 50.8% in the third quarter and generated over $230 million in operating cash flow year-to-date. The company raised its full-year gross margin guidance to 47-48% and increased its EPS guidance to $7.80-$9.80. Boston Beer plans to reinvest some of the margin gains into additional advertising, focusing on local market activation to support brands like Twisted Tea and Sun Cruiser.
In summary, the Boston Beer Company’s earnings call reflected a balanced sentiment with both achievements and challenges. The company celebrated strong margin expansion and the success of Sun Cruiser, while also addressing declines in Twisted Tea and Truly Hard Seltzer sales. Looking forward, Boston Beer remains focused on strategic initiatives to improve margins and support key brands.