Beyond Meat Stock Surges 15% After Cutting Losses and Improving Margins in Q4
On Friday, Beyond Meat beat analysts’ expectations for its fourth quarter results, shrinking its losses and reporting higher-than-expected revenue. The news sent Beyond shares soaring by 15% in after-market trading.
“We are transitioning our business… to one that prioritizes cash flow and sustainable long-term growth”
In an earnings call, Beyond Meat CEO Ethan Brown said that Q4 concluded a “[C]hallenging year for our business and category, one marked by persistently high inflation and trading down by consumers among proteins, slowing economy in key markets, and increased competitive activity.”
Indeed, the company reported a 21% decline in revenue and lower sales across “all channels”, including a 17% drop in US grocery sales and a 30% sales decline in food service. International revenue also fell by 19.9% from the same period a year earlier.
Despite the drop in sales, Beyond successfully shrunk losses and improved margins, beating many analysts’ predictions.
Owing to a series of cost-cutting measures, Beyond Meat narrowed its losses to $66.9 million, or $1.05 a share, from $80.4 million, or $1.27 a share, a year earlier. Analysts had forecast a steeper per-share loss of $1.18.
In addition, the company reported improving its margins by 14%, with a revenue of $79.9 million, higher than the $75.7 million analysts expected.
According to Brown, the company’s restructuring plan has managed to reduce expenses by nearly one-third. He also stated the company is pivoting from a growth strategy to one focused on preserving cash and reaching profitability. “We are transitioning our business from an operating model that prioritizes growth above all, to one that prioritizes cash flow and sustainable long-term growth,” Brown said.
As it seeks to become cash flow-positive by the second half of 2023, Brown revealed Beyond’s three-pronged strategy:
- Margin recovery and operating expense reduction, dropping from eight co-manufacturers in North America in 2022 down to three, reducing exposure to underutilization or idle time penalties.
- Inventory reduction.
- Targeted discounts and more focused marketing to specific consumer demographics, expanding the frozen range.
When asked why the company focused on discounting when it had not yet delivered substantial volume benefits, Brown said: “With the pricing programs we’re testing now, we’re seeing very good unit velocity responses, and some pretty solid revenue gains. We’re coupling our pricing with those types of messages for the right consumer in the right demographic.”
He added, “Instead of offering a blanket discount, we’re looking at segments where the consumer is far more interested in our value proposition. For folks that are 40 and older, it tends to be around the health message… for folks who are younger, they are much more receptive to climate messaging.”
“I want to emphasize the transition that’s occurring in Europe with the consumer. If you look at Germany, over the last 10 years, there’s been a remarkable reduction in animal protein consumption on a per capita basis,” he said, noting McDonald’s recent launch of the McPlant Burger and plant-based McNuggets. “And I think that bodes very well for what we’ll see in the United States at some point.”