Here’s why Boston Beer stock is giving investors a hangover

By: Ruchi Gupta
Ruchi Gupta
Ruchi takes fitness and maintaining a healthy lifestyle very seriously. During her spare time, she enjoys swimming, running, and… read more.
on Jul 23, 2021
  • Boston Beer shares plunge 21% on disappointing Q2 2021 results
  • Softer than anticipated demand for hard seltzer impacted earnings
  • Boston Beer expects earnings of between $18 and $22 per share for full year

Boston Beer (NYSE: SAM) shares plunged 26.17% on Friday in morning following disappointing second quarter revenue and earnings results attributed to poor hard seltzer demand. Company’s revenue of $603 million and earnings of $4.75 per share missed analysts’ revenue and earnings estimates of $658 million and $6.69 per share, respectively.

Softer hard seltzer demand led to poor earnings in Q2 2021

The company cited softer-than-anticipated hard seltzer demand during the quarter for the uninspiring results. Truly Hard Seltzers is among the company’s top brands, but slowing growth and emerging competition were among the factors that affected the brand’s sales during the quarter. Boston Beer founder and Chairman Jim Koch said:

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“During the second quarter we saw significant growth in the On-Premise channel and re-opened all our retail locations as most COVID-19 restrictions have been lifted. However, our 24% depletions growth for the second quarter decelerated from our first quarter growth of 48% and was below our expectations, as the hard seltzer category and overall beer industry were softer than we had anticipated.”

CEO Dave Burwick added:

“We overestimated the growth of the hard seltzer category in the second quarter and the demand for Truly, which negatively impacted our volume and earnings for the quarter and our estimates for the remainder of the year.”

Higher than anticipated inventories increased supply chain costs

The company increased it’s Truly production to meet the summer peak. The lower than expected demand for particular Truly brand styles led to higher than anticipated inventory levels at Boston Beer’s breweries. As a result, this increased complexity and supply chain costs. Burwick added:

“We have been experiencing out of stocks on certain of our can products, most significantly on our Twisted Tea brand family. We expect wholesaler inventories of Twisted Tea to remain tight for the rest of the summer. Our outlook for the hard seltzer category in the second half of 2021 is uncertain and we have planned our capacity and spending based upon several volume scenarios.”

Also, the company has revised its full-year projections for earnings per share.  For FY 2021, the company expects EPS of $18-$22, but the forecast excludes the effect of ASU 2016-09. Koch noted:

“We remain highly positive about the future growth of our brands and that our diversified brand portfolio continues to fuel double-digit growth.”

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