Boston Beer Keeps Outlook as Sales Decline Deepens
Second-quarter net revenue fell 3.3% to $568.3 million as lower volume outweighed pricing and product mix.
Boston Beer Company (SAM), the brewer behind Samuel Adams and Truly, reported a 6% decline in second-quarter depletions, worsening from a 4% drop in the first quarter and a 5% decline a year earlier.
The results extended a volume slowdown even as seasonal demand lifted revenue from $433.9 million in the first quarter. Shipments fell 4.5% to about 2.0 million barrels, a narrower decline than the first quarter’s 6.9% but steeper than the 0.8% drop in the year-earlier period.
Net revenue fell from a year earlier, reversing the 1.5% growth recorded in the comparable quarter of 2024. GAAP diluted earnings declined to $4.96 a share from $5.45, despite a $1.31-a-share benefit from supplier litigation; excluding that benefit, earnings were $3.65 a share.
Lower volume drove the revenue decline, while favorable product mix and pricing provided a partial offset. Shipments declined for Twisted Tea, Truly, Samuel Adams, Hard Mountain Dew and Dogfish Head, while Sun Cruiser and Angry Orchard grew. Dogfish Head had posted growth in both the first quarter and the year-earlier second quarter.
Gross margin expanded 60 basis points to 50.4%, helped by a reduced drag from shortfall fees and third-party production prepayments. Those costs fell to $1.6 million, or 28 basis points, from $8.3 million, or 141 basis points, a year earlier. Advertising, promotional and selling expense rose 16.4%, including $17.5 million of additional local marketing and point-of-sale investment and $8.6 million of higher freight costs.
Operating income declined to $70.8 million from $82.1 million even after an $18.0 million net pretax litigation benefit. A favorable prejudgment-interest adjustment reduced the first-half litigation-related earnings hit to $14.27 a share from the $15.52 previously projected.
Boston Beer maintained its 2024 non-GAAP earnings outlook of $8.50 to $10.50 a share and continued to expect a low- to mid-single-digit volume decline. It raised the bottom of its gross-margin range by 50 basis points to 48.5%, cut its projected increase in advertising, promotional and selling expense to zero to $20 million, and lowered capital-spending guidance to $60 million to $80 million.
The company expects shipments to decline by low to mid-single digits in the third quarter before returning to modest growth in the fourth. It ended the second quarter with $265.5 million in cash and no debt, leaving the projected fourth-quarter turn dependent on a recovery in shipment volume.