Jefferies' Kevin Grundy maintains an Underperform rating on National Beverage with a price target lowered from $34 to $33.
National Beverage reported fourth quarter sales of $239.9 million, which beat Street's expectations but Grundy said gross margins were "much worse" than expected at 35.3% versus expectations of 38.3%. The company realized higher input costs and volume de-leverage in the quarter, which also prompted a notable operating income and earnings per share miss.
Meanwhile, third-party data from Nielsen points to a 9.8% decline in National Beverage's sales for the four-week period ending June 15. Grundy said the data also implies market share losses of 470 basis points over the past four weeks, 470 basis points over the past 12 weeks and 240 basis points over the past year.
By contrast, PepsiCo's (NASDAQ: PEP) LaCroix competitor Bubly gained market share over the same periods. Grundy said PepsiCo CEO Ramon Laguarta is "very focused" on supporting its sparkling water brand moving forward.
Growing competition in the sparkling water space is evident and the LaCroix will need higher levels of investments to stabilize, according to Grundy. Regardless, there is unlikely to be any quick, cheap, or even certain turnaround plan that warrants a cautious stance on National Beverage's margin recovery and top-line expansion.
National Beverage closed Thursday higher by 4.3% at $44.06 per share.
Millennial Research Firm Says Young Consumers Still Love LaCroix
National Beverage Trades Lower As Company Faces More Questions Over LaCroix Ingredients
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