Traeger(US:COOK)2022-11-12 22:01Financial Data and Key Metrics Changes - The company experienced a 42% decline in third quarter sales, with grill sales down 64% compared to the previous year [6][31] - Gross profit decreased to $26 million from $54 million last year, with a gross profit margin of 27.7%, down 580 basis points year-over-year [34] - Net loss for the third quarter was $210 million, compared to a net loss of $89 million in the same period last year, resulting in a net loss per diluted share of $1.75 [38] Business Line Data and Key Metrics Changes - Consumables revenue decreased 10% to $25 million, while accessories revenue increased 18% to $30 million, driven by strong growth at MEATER [32][33] - Grill revenue decline was attributed to lower unit volumes as retailers reduced replenishment orders, partially offset by higher average selling prices [31] Market Data and Key Metrics Changes - North American revenue faced challenges due to a decline in the U.S. business and negative growth in Canada, while the rest of the world business grew 10% [33] - The company noted that more than two-thirds of the anticipated decline in grill sales in the second half of the year was due to retailer destocking rather than lower consumer demand [11] Company Strategy and Development Direction - The company is focused on reducing costs, rightsizing inventories, and driving improvements in gross margin as part of its near-term strategic priorities [14][18] - The company aims to enhance brand awareness, with unaided brand awareness hitting an all-time high, improving by 15% year-to-date [20] - Product innovation remains a key growth pillar, with plans to launch two new grills in 2023 and a collaboration with WhistlePig for new consumables [23][24] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenging operating environment due to high inflation and geopolitical uncertainty, impacting consumer sentiment and retailer ordering behavior [6][10] - The company expects full-year sales to be at or slightly below the low end of prior guidance, anticipating continued pressure from retailer destocking into the first half of 2023 [10][44] - Management remains optimistic about long-term growth, emphasizing the resilience of the outdoor cooking category and the commitment of retail partners to the Traeger brand [12][29] Other Important Information - The company recorded a $110 million noncash impairment charge to goodwill due to adverse macroeconomic conditions [38] - Cash and cash equivalents totaled $8 million at the end of the third quarter, with total net debt of $444 million and a net leverage ratio of 8.9% [39] Q&A Session Summary Question: How does the company assess supply versus demand dynamics? - Management indicated that while there is softness in demand, sell-through trends have shown stability, and promotional activities have helped improve sell-through [51][52] Question: What is the current state of channel inventory? - Management confirmed good visibility into channel inventory levels, noting sequential improvements and the need for time to work through excess inventory [58] Question: How significant is the impact of a large retailer's private label pellet business? - Management acknowledged the retailer's importance but expressed confidence in the stability of Traeger pellet sales, excluding the impact of the private label [60][62] Question: What are the plans for capital expenditures and deleveraging? - Management plans to keep capital expenditures minimal and focus on improving liquidity and profitability to aid in deleveraging efforts [66][85]