Beyond Meat posted another quarter of falling revenue and pointed to likely lower sales in 2024 as its US business continues to be hit by “weak” demand.
Net revenue fell 7.8% to $73.7m in the fourth quarter to 31 December and was down 18% for the year at $343.4m. The US-based alternative-protein maker has forecast sales will be in the range of $315m to $345m for the new financial year.
Both adjusted EBITDA and bottom-line losses widened over the three months but narrowed in fiscal 2023, while margins for the first metric remained in negative territory with a more skewed minus slant than a year earlier.
Gross profit also stayed in the red, along with a blowout in margin losses associated with $78m in non-cash charges related to the “global operations review” announced in November.
On a mixed note, Beyond Meat anticipates the gross margin will turn positive in 2024, with the company pointing to list price increases to boost the top line.
“In 2023, Beyond Meat undertook extensive initiatives to reset the business toward sustainable operations and ultimately profitable growth. Much of this reset is now coming into view,” founder, president and CEO Ethan Brown said in the results commentary.
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He added that the plan for 2024 “includes taking steps to steeply reduce operating expense and cash use; pricing actions and the right-sizing of our production footprint, both in support of margin expansion.”
The review revealed in November included what Brown said at the time would involve a reassessment of Beyond Meat’s China operations, SKU rationalisation and a potential exit from unspecified channels and markets.
Last week, the Nasdaq-listed business unveiled the latest iteration of its product concept – the Beyond IV burger – which Brown said yesterday (27 February) “delivers superior health benefits and taste”.
While the CEO did not disclose any further explicit detail on the review, he said it entails “taking certain non-cash charges pertaining to inventory and assets that are no longer consistent with our path to profitability”.
He added: “We believe these sweeping changes, together with measures we plan to pursue this year to bolster our balance sheet, will strengthen our near-term operations as we pursue our vision of being the global protein company of the future.”
The $78m impairment consisted of $67.5m connected with the review and $10.5m related to “other specific non-cash charges”.
“Destination still uncertain”
Jon Andersen, a partner at US-based investment bank William Blair, wrote in a research note: “With demand still sluggish, the company continues to work to right-size the product and customer portfolio and implement actions to lower costs across the enterprise and preserve cash.”
Commenting on the “flattish” sales outlook, the expected improvement in gross margins and planned price increases, Andersen added: “These actions are necessary and have fundamentally changed the story for the time being.
“We feel the approach also limits the company’s ability to invest in demand-driving activities, perhaps including efforts to change the narrative around the benefits of plant-based meat.
“We feel the company’s journey to sustained and self-funded growth is likely to be measured in quarters as opposed to months, with the destination still uncertain.”
The gross margin is expected to turn into the black in fiscal 2024, around the “mid-to-high teens” area, back weighted to the second half of the year.
That margin was a negative 24.1% last year, compared to minus 5.7% in 2022. It ballooned to minus 113.8% in the fourth quarter from a negative 3.7% in the corresponding three months a year earlier.
“The company’s operating environment continues to be affected by uncertainty related to macroeconomic issues including: ongoing further weakened demand in the plant-based meat category, inflation and higher interest rates and concerns about the likelihood of a recession, among other things, all of which could have unforeseen impacts on the company’s actual realised results,” Beyond Meat noted in the commentary.
Beyond Meat posted an adjusted EBITDA loss last year of $269.2m, shrinking from a $278m loss. But the loss widened in the further quarter to $125.1m from $56.5m. The margin for the respective periods was a negative 78.4% and 169.9%.
As was evident in the third-quarter results, Beyond Meat’s US sales in both retail and foodservice continued to fall in the final three months of 2023, while those in the international division remained on an upward slope.
US retail sales dropped 22.6% to $32.1m as volumes declined 6.8%, “primarily reflecting weak category demand”. They fell 25.9% in the out-of-home channel to $10.7m as volumes also decreased.
International retail registered a 22.1% increase to $13.3m, while foodservice sales were up 33.7% at $17.6m. Volumes rose 22.6% and 52.6%, respectively.
