Brett-EDH
TVWBB Hall of Fame
Weber shares are fired up despite weak JunQ numbers as investors focus on cost-savings plan
10:44 AM ET 8/15/22 | Briefing.com
Weber (WEBR +17%) shares are fired up today despite the grill maker posting its fourth-straight quarterly net loss in Q3 (Jun). WEBR also saw revs fall 21.1% yr/yr to $527.8 mln as inflationary pressures continued to weigh on consumer confidence in each of its markets.
Meanwhile, gross margins contracted 1,560 bps yr/yr to 29.1%. Most of the decline can be attributed to commodity cost increases and the considerable drop in sales yr/yr. Still, a few other factors pressured margins in the quarter, including lower production volume due to suppressed consumer demand, FX headwinds, and higher promotional activity to assist struggling sales growth. WEBR expects these hurdles to persist over the near term.
So why is the stock so hot today?
As his first full quarter at the helm, interim CEO Alan Matula outlined further cost-saving details to help WEBR push through the incredibly challenging macro environment, which is throwing a one-two punch of higher grill and meat prices. For example, Tyson Foods (TSN) saw chicken prices surge by over 20% yr/yr in JunQ and is witnessing softer consumer demand for premium cuts of beef. The new cost initiatives center around preserving WEBR's overall cash position. Alongside the previously announced dividend suspension, WEBR plans to reduce its headcount by 10%. Management commented that these cost-saving measures are already underway and should favorably impact Q4 (Sep) and FY23. Investors may also be reacting positively after similarly lackluster JunQ earnings results from competitor Traeger (COOK) last week, which also introduced details on a cost reduction plan. Along with similar measures as WEBR, COOK's strategy also involved having to suspend operations of its meal kits business and postpone its near-shoring efforts by halting plans for production in Mexico. However, unlike WEBR, COOK did not expect its initiatives to materially impact FY22 margins. In total, WEBR expects its cost-saving initiatives to create at least $110 mln of yr/yr cash benefit after restructuring costs in FY23. When combing these factors with short interest standing at nearly 56%, shares are sizzling today.
Overall, investors are looking past WEBR's paltry Q3 numbers and applauding its moves to navigate this tricky environment, where grill prices continue to tick up in tandem with meat prices. However, given the current market dynamics, we would employ a wait-and-see attitude as consumers demonstrate a hesitancy toward higher discretionary purchases, such as grills, shifting their tastes toward experiences like travel.
On a final note, WEBR mentioned that foot traffic at U.S. home improvement retailers was down 16% YTD compared to the prior year, raising the concern for Home Depot (HD) and Lowe's (LOW), which will report JulQ earnings on August 16 and 17, respectively.
10:44 AM ET 8/15/22 | Briefing.com
Weber (WEBR +17%) shares are fired up today despite the grill maker posting its fourth-straight quarterly net loss in Q3 (Jun). WEBR also saw revs fall 21.1% yr/yr to $527.8 mln as inflationary pressures continued to weigh on consumer confidence in each of its markets.
Meanwhile, gross margins contracted 1,560 bps yr/yr to 29.1%. Most of the decline can be attributed to commodity cost increases and the considerable drop in sales yr/yr. Still, a few other factors pressured margins in the quarter, including lower production volume due to suppressed consumer demand, FX headwinds, and higher promotional activity to assist struggling sales growth. WEBR expects these hurdles to persist over the near term.
So why is the stock so hot today?
As his first full quarter at the helm, interim CEO Alan Matula outlined further cost-saving details to help WEBR push through the incredibly challenging macro environment, which is throwing a one-two punch of higher grill and meat prices. For example, Tyson Foods (TSN) saw chicken prices surge by over 20% yr/yr in JunQ and is witnessing softer consumer demand for premium cuts of beef. The new cost initiatives center around preserving WEBR's overall cash position. Alongside the previously announced dividend suspension, WEBR plans to reduce its headcount by 10%. Management commented that these cost-saving measures are already underway and should favorably impact Q4 (Sep) and FY23. Investors may also be reacting positively after similarly lackluster JunQ earnings results from competitor Traeger (COOK) last week, which also introduced details on a cost reduction plan. Along with similar measures as WEBR, COOK's strategy also involved having to suspend operations of its meal kits business and postpone its near-shoring efforts by halting plans for production in Mexico. However, unlike WEBR, COOK did not expect its initiatives to materially impact FY22 margins. In total, WEBR expects its cost-saving initiatives to create at least $110 mln of yr/yr cash benefit after restructuring costs in FY23. When combing these factors with short interest standing at nearly 56%, shares are sizzling today.
Overall, investors are looking past WEBR's paltry Q3 numbers and applauding its moves to navigate this tricky environment, where grill prices continue to tick up in tandem with meat prices. However, given the current market dynamics, we would employ a wait-and-see attitude as consumers demonstrate a hesitancy toward higher discretionary purchases, such as grills, shifting their tastes toward experiences like travel.
On a final note, WEBR mentioned that foot traffic at U.S. home improvement retailers was down 16% YTD compared to the prior year, raising the concern for Home Depot (HD) and Lowe's (LOW), which will report JulQ earnings on August 16 and 17, respectively.
. Of course then too I rarely buy anything new.