Beyond Meat (BYND) reported fiscal second quarter results that missed estimates as the company battles operational headwinds and weak margins.
Beyond Meat's stock dropped in after-hours trading with shares down as much as 6%.
Here are Beyond Meat's second quarter results compared to Wall Street's consensus estimates, as compiled by Bloomberg:
Revenue: $147 million versus $149 million expected
Adj. profit/loss per share: -$1.53 versus -$1.19 expected
Similar to the first quarter, Beyond Meat reported a wider-than-expected loss as the company's plant-based jerky, created in partnership with PepsiCo (PEP), continued to weigh on margins. The company blamed its revenue miss on the impact of sales to liquidation channels, in addition to foreign exchange headwinds and increased discounts.
"We recognize progress is taking longer than we expected...Our transition to mass market consumption will occur as we actualize our vision: providing consumers with plant-based meats that are indistinguishable from, understood as healthier than, and at price parity with their animal protein equivalents," CEO Ethan Brown said in a statement.
Beyond Meat unveiled that it will be cutting 4% of its global workforce. Ahead of earnings, the company eliminated about 40 positions as part of a broader cost-cutting plan, according to an internal memo, cited by Bloomberg.
Gross profit was a loss of $6.2 million, or gross margin of -4.2% of net revenues, in the second quarter. This greatly lagged the year-ago period when the company reported gross profit of $47.4 million, or gross margin of 31.7% of net revenues.
The company cut its guidance for full year 2022, maintaining that net revenues are expected to be in the range of $470 million to $520 million, an increase of 1% to 12% compared to 2021. This compares to previous expectations between $560 million to $620 million.
Beyond's leadership team noted that its operating environment continues to be affected by near-term uncertainty related to macroeconomic issues, including inflation and rising interest rates, in addition to COVID-19 and supply chain disruptions.
On the earnings call, the company revealed that it sees a delay in post-COVID resumption of growth, and that shopping patterns have shifted away from plant-based meat with consumers largely trading down.
Analysts largely expect Beyond Meat's sales and profits to remain volatile until the company makes greater strides in containing operating expenses.
"The pursuit of growth opportunities such as jerky is creating operational inefficiencies and higher costs, burning through cash," Bloomberg Intelligence analyst Jennifer Bartashus said in a recent note, adding that "elevated supply-chain costs and production challenges may weigh on margins."
She cautioned that the company's focus on long-term growth initiatives may offset short-term wins and that consistent profitability may not arrive for several years with consensus estimates calling for annual losses through 2023.
Overall, although high-profile partnerships (like its recent collaboration with Kim Kardashian) will help the company stand out, it "needs to balance investment in growth strategies with progress toward sustainable profitability and long-term earnings," she said.
The plant-based meat maker has struggled to maintain its initial pace of growth with shares plummeting more than 70% over the past 12 months.
Moving forward, investors will want greater clarity on scalability and the prospect of certain restaurant partnerships, like McDonald's McPlant rollout, as food-service revenue severely lags retail.
Recent reports from BTIG and JPMorgan indicated that the McPlant received lukewarm demand in its most recent U.S. test. At this point, there have not been any announcements on additional tests or a nationwide launch for the menu item.
A few bright spots that Beyond Meat could capitalize on in the quarters to come include an uptick in international revenue growth, as well as an increase of innovative restaurant partnerships and wider distribution points in grocery stores.
The outlook for plant-based food alternatives remains bright, however, as the category leans on innovation, while also increasing production, lowering costs, and adjusting recipes to embrace consumer preferences.
Competition in the plant-based sector has exploded over the past several years — from lab-grown meat to fungi-based products. The increased competition has played a significant role in some of Beyond Meat's recent struggles.
The plant based category's global retail sales are estimated to reach $166 billion by 2031, or 10.6% of the expected $2.2 trillion protein market.
Alexandra is a Senior Entertainment and Food Reporter at Yahoo Finance. Follow her on Twitter @alliecanal8193 and email her at [email protected]
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