Beyond Meat Stock Plummets As Marketing Costs, Slowing Demand Tigger Wider Q1 Loss
Updated at 9:47 am EST
Beyond Meat (BYND Get Beyond Meat, Inc. Report shares plunged lower Thursday after the plant-based food producer posted a wider-than-expected first quarter loss as marketing and new product launch costs hollowed-out the impact of impressive volume growth.
Beyond Meat recorded a loss of $1.58 per share for the three months ending in March, well outside the Street forecast and down from a loss of 43 cents per share last year, even as revenues rose 1.2% to $109.5 million. Inflation and supply chain snarls ate into profit margins, which narrowed to just 0.2%, compared to 30.2% last year, as did the "expensive and inefficient" costs linked to marketing a new plant-based jerky with PepsiCo (PEP Get PepsiCo, Inc. Report, according to CFO Philip Hardin.
Beyond Meat has also expanded its plant-based chicken products to various CVS (CVS Get CVS Health Corporation Report, Albertsons (ACI Get Albertsons Companies, Inc. Class A Report and Whole Foods (AMZN Get Amazon.com, Inc. Report locations while prepping the introduction of Beyond Burger and Beyond Meatballs to 2,000 different U.S. stores.
Earlier this year, McDonald's (MCD Get McDonald's Corporation Report said it would expand the test market for Beyond Meat's plant-based burger starting in February, offering it at round 600 test locations in U.S.-based restaurants, mostly in and around San Francisco and Dallas.
Looking into the coming financial year, Beyond Meat reiterated its forecast for total sales of between $560 million and $620 million, adding that margins would steadily improve over the back half of 2022.
"The high cost of Beyond Meat Jerky will continue to be a headwind in Q2, but we expect substantial improvement in Jerky unit economics in Q3 and Q4," said CEO Ethan Brown. "We expect Q1 2022 margins were the low point in '22, with continued progress in Q2, albeit still well below historical levels, accelerated back into higher margins later in the year."
Beyond Meat shares were marked 13% lower in early Thursday trading to change hands at $23.61 each, a move that would extend the stock's six-month decline to around 65%.
"We note that over the course of Q1, Beyond executed a series of cost-intensive measures which, while temporarily reducing the company’s gross margin, are intended to support long-term growth objectives," said Canaccord Genuity analyst Bobby Burleson, who reduced his price target on the stock by $15, to $35 per share while keeping his 'hold' rating in place following last night's earnings.
"While valuation has come in substantially, we remain on the sidelines based on the view that additional estimate cuts will be needed prior to trough fundamentals," he added.