Boston Beer(US:SAM)2023-04-28 02:05Financial Data and Key Metrics Changes - The company's first quarter 2023 gross margin decreased to 38.0% from 40.2% in the first quarter of 2022, primarily due to higher inventory obsolescence costs and higher brewery processing costs, partially offset by price increases [56][81] - A net loss of $9 million or $0.73 per diluted share was reported for the first quarter, compared to a net loss of $2 million or $0.16 per diluted share in the same period last year, driven by lower net revenue and gross margins [81] - Depletions for the quarter decreased by 6% from the prior year, reflecting declines in several brands, partially offset by increases in Twisted Tea and Hard Mountain Dew [79] Business Line Data and Key Metrics Changes - Twisted Tea experienced a 34% dollar sales growth in the first quarter, adding 3 share points and expanding its overall share leadership, now accounting for 27% of total FMB dollar sales in measured off-premise channels [40] - Truly's performance was negatively impacted by the overlap with the previous year's Margarita launch, which constituted over 25% of the total Truly business in the first quarter last year [18][46] - The core Truly business is showing signs of stabilization, with an increase in sales per point and share growth in almost half of the 63 markets tracked by Circana [20][73] Market Data and Key Metrics Changes - The hard seltzer category is expected to decline from about 10% of beer to closer to 8%, while Truly is projected to increase its share from 25% to 27% within that category [104] - The company anticipates that the Truly refresh program will help mitigate headwinds as the year progresses [50] Company Strategy and Development Direction - The company is focused on sustaining Twisted Tea's growth and improving Truly's volume trends while simplifying its business to enhance gross margins [48] - A major advancement of the Truly brand is set for launch, including a simplified product lineup and increased marketing efforts [41] - The company aims to return to long-term sustainable growth through operational changes and continued investment in innovation [70] Management's Comments on Operating Environment and Future Outlook - Management acknowledged the challenges posed by the macroeconomic environment and indicated that the company is prepared to adapt its strategies accordingly [9][10] - The company expects to see improvements in margins in the second half of the year as operational plans take effect [38][76] - Management expressed optimism about the potential for recovery in Truly's performance as the brand refresh takes hold [20][50] Other Important Information - The company repurchased 82,000 shares at a cost of $27.5 million, with approximately $62.8 million remaining on the share repurchase authorization [60] - Full year 2023 gross margins are expected to be between 41% and 43%, with a focus on covering inflationary cost increases through pricing [82] Q&A Session All Questions and Answers Question: What are the expectations for Truly? - Management indicated that Truly is expected to continue losing market share, but they are hopeful for improvements in the second half of the year due to new initiatives [5][18] Question: Can you comment on supply chain utilization? - Management stated that internal capacity is planned to be fully utilized, while external capacity serves as an insurance policy for growth [15] Question: What is the impact of the Truly Vodka Seltzer rebranding? - The rebranding had a negative impact on margins, estimated at 100 to 150 basis points in Q1, but management believes it will benefit the brand in the long run [19][80] Question: How is the organization handling recent challenges? - Management expressed confidence in the resilience of the organization and the sales force, emphasizing their readiness for upcoming initiatives [103]