Celsius Holdings (NASDAQ:CELH) plunged 11% after the energy drink brand reported a plunge in profits due to a sharp fall in North American sales and tighter profit margins due to supply chain optimization by its largest distributor.
Group revenue leaked 31% lower year-on-year to $265.7 million in the third quarter, as the North American business saw turnover drop 33%, as orders were hit by the distributor's process, partly offset by a 37% bubbling up in the smaller international sales segment.
Sales to Costco in the quarter increased 15% and sales to Amazon.com increased 21% but sales to Sam’s Club and BJs were lower than a promotion-boosted period a year ago.
Gross margin shrank to 46% from 50.4% a year ago as the company's largest distributor implemented a sizable supply chain optimization program in the quarter.
CFO Jarrod Langhans said Celsius "managed sales and marketing spend to minimize interruptions while still turning a profit in the quarter. This activity did not impact customer sales at the retail level, which remain healthy."
Adjusted earnings (EBITDA) fell 96% to $4.4 million and earnings per share fell to $0.00 from $0.30 a year ago, versus the $0.03 consensus forecast.
Chairman and CEO John Fieldly pointed out that Celsius enjoyed energy drink category growth in retail in the quarter and "outpaced the category in dollar and volume sales gains despite overall category softness".
"Pronounced supply chain optimization by our largest distributor, which we believe has largely stabilized, had an outsized and adverse impact on our operating results during an otherwise solid quarter."
He said the company remains focused on the long-term growth strategy of "expanding our consumer base, broadening our availability, and being the preferred beverage for more occasions".
During the period, Celsius paid $75 million to acquire co-packer, Big Beverages, which the directors believe will "unlock innovation and other supply chain efficiencies".