Sonos had its first normal holiday season since the pandemic started, leading to the company making record revenue in its fiscal first quarter and beating analysts’ earnings expectations. The smart-speaker company says it is persevering even as Americans spend less on electronics overall.
Sonos (SONO) posted 57 cents of earnings per share on $673 million in revenue, ahead of expectations for 38 cents on $594 million in revenue. The stock was up 15.6% after the release.
“Consumer spending for goods was down, the home electronics category was down, and yet we set a revenue record,” said CFO Eddie Lazarus in an interview.
Sonos had enough inventory in the latest quarter to offer holiday promotions, something that it hadn’t been able to do the year before because it simply didn’t have enough speakers to sell. The promotions, however, weighed on gross margins, which fell to 42.4% from 47.8% the year before. Lazarus said the gross margin was inflated the prior year because the company didn’t offer a promotion.
Sonos stock has fallen 33% over the past year. The company struggled with supply chain shortages that forced delays in product shipments, and its sales flattened out after booming early in the pandemic.
Lazarus said that the company increased its customer base to 14 million during the pandemic from nine million before, accelerating growth beyond expectations. But the stock isn’t simply a pandemic play that will wane now that people are venturing out more, he asserts. “Rather than being what we sometimes call a ‘Covid round tripper’, we view Covid as having lifted our whole level. As macroeconomic conditions improve, we can then grow from there.”
Sonos also hasn’t had to cut staff, like other tech companies. “It gives us a chance to invest and lean in when others are kind of retreating and pulling back,” said CEO Patrick Spence.
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