MW Molson Coors sees weakness in U.S. beer volumes, leading to a sales miss
By Tomi Kilgore
Molson taking a majority stake in energy brand ZOA, with co-founders including Dwayne 'The Rock' Johnson
Molson Coors Beverage Co. reported Thursday third-quarter sales that missed expectations and said it now expects a decline for the year, amid weakness in the U.S. beer industry, but stressed that other factors weighing on results were just temporary.
Separately, the beer brewer $(TAP)$ said it was taking a majority ownership stake in the better-for-you energy brand ZOA, in which Dwayne "The Rock" Johnson is among the co-founders.
"We believe ZOA is well positioned, particularly as it plays in the better-for-you segment that is outpacing energy category growth," said Chief Executive Gavin Hattersley on the post-earnings call with analysts, according to an AlphaSense transcript.
Hattersley also said that while the U.S. beer industry was softer that anticipated during the peak summer season, as consumers exhibited "value-seeking behavior," other headwinds to results have mostly dissipated.
"We knew we had a headwind in the quarter from exit of Pabst contract brewing volume, as well as from unfavorable shipment timing due to the unwind of our deliberate first half inventory build," Hattersley said. "And these drivers have largely played out as we expected."
He stressed that if you take out the impact of the contract brewing-related revenue declines, full-year revenue growth would be positive.
The stock had initially dropped in the premarket after earnings were reported, then turned higher after the opening bell. It was up 0.9% in midday trading, putting it on track for a fifth straight gain.
For the quarter to Sept. 30, the company said net income fell to $199.8 million, or 96 cents a share, from $430.7 million, or $1.98 a share, in the same period a year ago.
Excluding nonrecurring items, such as restructuring costs losses on disposals, adjusted earnings per share of $1.80 beat the FactSet consensus of $1.67. That marked the eighth straight quarter of bottom-line beats.
Net sales declined 7.8% to $3.04 billion, below the FactSet consensus of $3.13 billion, to snap a four-quarter streak of beats.
The sales weakness was driven by a 12.3% drop in financial volume sank 12.3%, which was partially offset by a 4.5% increase in price and sales mix.
The cost of goods sold fell, but by less than sales, as gross margin slipped to 39.5% to 40.8%.
In the Americas, sales declined 11% to $2.35 billion, as financial volumes sank 15.6%, amid lower U.S. volumes and the timing of some U.S. shipments, while price and mix rose 4.9%.
"Given the impacts the macroeconomic environment has had on the U.S. beer industry and our U.S. financial volumes during this year's peak selling season, we are adjusting our 2024 [sales growth] guidance to down approximately 1% from previous guidance of up low single-digits, both on a constant currency basis," the company said in a statement.
Meanwhile, the company nudged up its full-year profit outlook, saying adjusted EPS growth is now expected to be toward the high end of the previously provided guidance range of a mid-single-digit percentage increase.
The stock has lost 6.8% year to date, while shares of fellow beer brewers Boston Beer Company Inc. $(SAM)$ have shed 11.7% and of Constellation Brands Inc. $(STZ)$ have declined 3.7%. The S&P 500 has rallied 25.1% this year.
-Tomi Kilgore
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November 07, 2024 12:12 ET (17:12 GMT)
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