The Boston Beer Company (NYSE: NYSE:SAM) recently reported its third quarter 2023 earnings, noting a decrease in depletion but promising growth in its flagship brand, Twisted Tea. The company also shared plans for operational improvements and strategic investments in digital advertising, while repurchasing significant stock and maintaining a robust balance sheet. According to InvestingPro, the Boston Beer Company has a market capitalization of 4420M USD and a P/E ratio of 54.2 indicating it is trading at a high earnings multiple.
Key takeaways from the call include:
- Depletion decreased by 6% on a fiscal calendar basis and 3% on a comparable week's basis.
- Twisted Tea, the company's largest brand, saw a 34% increase in dollar growth.
- Truly Hard Seltzer continues to experience declines.
- The company has made operational improvements enhancing its margin and delivering gross margin improvement for the last two quarters.
- The company repurchased over $69 million of stock in 2023.
- The company plans to shift its advertising spend from traditional to digital and social media.
- The company expects depletions and shipments to be down 5% to 7%, with increases in revenue per barrel of 2% to 3%, and gross margins between 42% and 43%. This is in line with the company's recent gross profit margin of 42.18% as per InvestingPro data.
- They anticipate an increase in brand spend and a full-year effective tax rate of approximately 28%.
- The company has a cash balance of $311 million and plans to invest between $60 million and $90 million in capital expenditures for the year. This aligns with an InvestingPro Tip that highlights the company holds more cash than debt on its balance sheet.
The Boston Beer Company has been focusing on improving internal line stability, reducing costs, and optimizing logistics to reduce waste and improve efficiencies. As a result, the company has seen lower inventory obsolescence costs and improved gross margins. InvestingPro Tips also points out that the company has a perfect Piotroski Score of 9, indicating a healthy financial situation.
The company plans to continue investing in Twisted Tea and Truly while developing innovation in the Beyond Beer category. They are testing a new 8% ABV version of Twisted Tea, called Twisted Tea Extreme, in select convenience stores across five states. If successful, the company may expand distribution next year.
Despite a decrease in fiscal calendar depletions and a 2.5% decrease in shipment volume for the third quarter, the company remains optimistic about its long-term outlook. They have adjusted their FY'23 guidance, narrowing the ranges and increasing gross margin, but being cautious about shipments and depletions. This cautious approach could be due to the company trading at a high EBIT valuation multiple, as suggested by InvestingPro Tips.
In terms of product expansion, the company has successfully extended its Twisted Tea brand with new variations and is testing a new brand called Truly Unruly. They plan to continue expanding their product lines at a slower pace, focusing on driving distribution for existing products before introducing new innovations.
The company has also been working on improving gross margins through waste reduction and procurement savings. They expect a lighter pricing environment for beer in the fourth quarter compared to the previous year. Lastly, the company aims to maximize internal capacity for production and optimize the geographical locations of its assets.
In their Q4 call scheduled for February, the company plans to provide projections for 2024, with a focus on continued growth in their beer category and a disciplined approach to product expansion. The company's next earnings date, as per InvestingPro data, is set for February 14, 2024. With a strong return over the last three months, as indicated by InvestingPro Tips, the Boston Beer Company seems poised for continued growth.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.