Cowen is lowering its fiscal year 2023 estimates for Boston Beer Company, analyst Vivien Azer wrote in a report today, noting the financial services firm has become “increasingly skeptical” that Boston Beer will meet its guidance of +4%-+10% shipment and depletion growth.
“As two-year growth continues to deteriorate and [year-to-date] sales in Nielsen channels are only up +1%, we think a -1% decline in Niesen revenues is likely a best case outcome,” Azer wrote.
Boston Beer reported a -25.1% decline in Q1 compared to Q1 2021 during its April earnings call with investors, marking the first time in the last 16 quarters that the company’s volume didn’t grow double digits. Despite losses, CEO Dave Burwick doubled down on the company projections, noting that even if its Truly Hard Seltzer “is negative, we can still hit the top end of our guidance.”
“While that seemed reasonable at the time, given that Q1 is a seasonably small quarter, Nielsen trends have deteriorated further,” Azer wrote.
Boston Beer’s total revenue is up +1% in tracked channels in 2022, and the company’s “two-year average growth has deteriorated meaningfully,” declining -14% in the last month, according to Azer, citing NielsenIQ data. Should these two-year growth levels hold, Azer expects the company will end the year with a -1% decline in revenue in Nielsen-tracked channels.
If the two-year average growth were to decline by a significant magnitude again, and Cowen “extended that trend out of the remainder of the year, implied revenues would be down -8.6%.”
Cowen is now projecting a +3% increase in revenue for the year, compared to its previous +9% projection, Azer wrote.
She added “there is little reason for optimism around a recovery in the hard seltzer category,” as the segment’s revenue declined -11.6% in May in Nielsen-tracked channels. Boston Beer’s revenue contracted -14.8% the same month, according to Azer.
“While we acknowledge [Boston Beer’s] share gains in the category throughout the year, category growth has come in below management’s expectations and reminds up of the setup for [Boston Beer] shares in 2015, when valuation became stretched due to overly high expectations for the growth of [Boston Beer’s] cider business,” Azer added.
In April, Burwick said Boston Beer’s goal for Truly “is to outgrow the [hard seltzer] category for the full year driven by innovation, continued brand building and superior distributor support and retail execution.” However, the company would rely on continued growth from its other brands: Twisted Tea, Samuel Adams, Angry Orchard and Dogfish Head.
In January, Boston Beer revised downward its shipment, gross margin and earnings per share projections for full-year 2021 due to lower than expected wholesaler inventory builds of Truly in Q4, as well as increased supply chain costs. The company had previously pulled its 2021 guidance in September 2021 amid hard seltzer uncertainty.