Profit warning crushes Green Mountain shares
The single-cup coffee vendor shocks analysts with a revenue miss and lower guidance.
What does it take to lose nearly half of your company's market capitalization in a day?
If you're Green Mountain Coffee Roasters (GMCR), you surprise Wall Street with a revenue miss. Then you guide lower for the fiscal year on revenue and earnings. And then you guide lower on revenue and earnings for the fiscal third quarter.
Oh, while you're at it, you note that your inventories doubled in size from a year ago. And you took a write-down of the value of some of your finished products and seasonal products, like cocoa, because sales in the quarter that ended on March 24 just weren't as good as you'd expected.
The result: Green Mountain Coffee shares were tanking Thursday, closing down 47.5% at $26. The stock had already got crushed in after-hours trading Wednesday. Once as high as $115.98, it has lost more than 75% of its value since mid-September.
Needless to say, the earnings report led to a pointed -- if polite -- conference call with analysts over what happened.
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Well, the company saw slowing growth in sales of its single-serve coffee packets. Green Mountain sells single-serve packets of coffee, teas and cocoa and markets Keurig brewers designed to handle the packets. Problem is a lot of other people are starting to sell the packets, too.
Like Starbucks (SBUX), but also supermarkets under private labels.
Maybe a warm winter was partly to blame, CEO Larry Blanford suggested during the conference call. You don't want a hot drink when it's 70 degrees in March.
Maybe, but analysts weren't buying the idea. One wondered if the company's business model was flawed because it's pretty easy for a competitor to make his own coffee packs and put those into Keurigs.
Plus, Starbucks plans to start selling its own brewer, called Verismo, in the fall to handle single-pack coffees and teas. Mind you, Starbucks actually sells single-cup coffee for use in the Keurig.
To respond, Green Mountain is launching a new higher-end brewer to make espressos and the like called the Vue.
Maybe it doesn't have good systems for measuring sudden changes in demand. But Blanford and others said that wasn't the issue. The issue, aside from the weather, is that the business is very fluid.
It hasn't been an easy time for the company since last fall when noted short-seller David Einhorn began asking if the company wasn't inflating its sales. The Starbucks announcement in March hardly helped matters.
For the record, Green Mountain earned 64 cents a share on revenue of $885.1 million in the second quarter. Earnings were up 33% from a year ago and actually ahead of the Street estimate of 58 cents. Revenue was up 37% from a year ago. But the Street was looking for $976.7 million.
For the third quarter, the company expects $861 million to $895 million in revenue and earnings of 48 cents to 53 cents. The Street had been looking for $1.05 billion in revenue and 72 cents in earnings.
Manipulators pretty much in control down here...They did their thing at about 1030 hrs or so but we've managed to minimize the damage a bit....Do not be too hopeful though, too many of these cheating scumbags....Will try to bring us down big again anytime now....Tomorrow will be a key day...We will see how are those employment numbers going to be "fixed".
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The solid report comes a month after the retailer closed all of its Canadian operations.
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