The Boston Beer Company (NYSE:SAM) reported its third-quarter earnings for 2023, revealing a decrease in depletion of 6% on a fiscal calendar basis and 3% on a comparable week's basis. The company's Twisted Tea brand showed strong performance while Truly Hard Seltzer continued to decline. Operational changes aimed at enhancing margins have resulted in gross margin improvements over the last two quarters, contributing to a gross profit of $869 million, as per InvestingPro data. The company remains cash-generative, repurchasing over $69 million of stock in 2023 and holding more cash than debt on its balance sheet, one of the key InvestingPro Tips for SAM.
Key takeaways from the call include:
- The Boston Beer Company is focusing on the Beyond Beer category, planning to invest in the Twisted Tea and Truly brands and innovate across Beyond Beer categories. This strategy aligns with the company's strong return over the last three months, as indicated by InvestingPro data.
- CFO Diego Reynoso narrowed the company's full-year guidance, expecting depletions and shipments to be down 5% to 7%. Revenue per barrel is expected to increase by 2% to 3%. This aligns with the company's recent revenue growth of 3.59%, as per InvestingPro data.
- The company reported a net income of $45.3 million or $3.70 per diluted share and ended the quarter with $311 million in cash and an unused credit line of $150 million. This healthy financial position is reflected in the company's perfect Piotroski Score of 9, another InvestingPro Tip for SAM.
- The company is testing an 8% ABV version of Twisted Tea, Twisted Tea Extreme, in convenience stores in five states.
- The company plans to continue efforts in waste reduction and procurement savings to improve gross margins.
- The company is working on maximizing internal capacity for manufacturing, aiming for 90-100% internal capacity, and optimizing its network of third-party manufacturers.
The Boston Beer Company is focusing its efforts on growing its core business while also exploring new innovations. The company's CFO, Diego Reynoso, discussed the financials for the third quarter and provided full-year guidance. Depletions for the quarter decreased by 6%, mainly due to declines in Hard Seltzers, offset by increases in Twisted Tea and Truly Vodka Soda. Shipment volume decreased by 2.5% compared to the prior year.
The company reported a gross margin increase to 45.7% for the quarter, driven by price realization and lower obsolescence and procurement savings. Advertising, promotional, and selling expenses decreased slightly, while general and administrative expenses increased.
During the call, the company also discussed its plans for Twisted Tea Extreme, an 8% ABV version of Twisted Tea currently being tested in convenience stores in five states. If the test is successful, the company may expand distribution next year.
Boston Beer also highlighted its success in building out the Twisted Tea brand in underdeveloped markets like California and Texas. The company mentioned its updated approach to innovation, focusing on testing new products and scaling them cautiously and slowly, discontinuing those that do not work.
Lastly, the company emphasized a disciplined approach to growth in the beer category, focusing on driving distribution rather than introducing new innovations. The company believes this approach maximizes growth for each SKU and avoids a chaotic introduction of new products. The company ended the call by announcing a Q4 call in February, where projections for 2024 will be discussed. For more insights and tips like these, consider exploring InvestingPro, which offers additional tips on SAM and other companies.
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