Boston Beer Company stock tumbles on earnings loss, hard seltzer revamp

Yahoo Finance Live’s Seana Smith discusses the decline in stock for The Boston Beer Company amid wider-than-expected fourth-quarter losses.

Video Transcript

RACHELLE AKUFFO: All right well the Boston Beer Company, maker of Sam Adams, Truly Hard Seltzer, Twisted Tea, and much more, reported disappointing fourth quarter earnings for a deeper dive now into the company's quarter. Let's get it over to Yahoo Finance's Seana Smith. Hey, Seana.

SEANA SMITH: Hey there, Rachelle. Let's take a look at Boston Beer Company because as you can see, shares off right about 12% right now. Putting that in perspective, this could potentially be the worst intraday performance that we have seen from this stock in just about a year and a half.

So breaking down the big takeaways from this report, why the Street is pretty disappointed, first up, that wider than expected loss in the fourth quarter. That, of course, was a black eye, but also weak full year profit forecast. That is weighing on the stock. Guidance for gross margins also coming up just a bit short there, the Street taking some issue with that.

Now this is largely because of the production mix and also supply chain inefficiencies. We heard a little bit more about that on the call last night. My second big takeaway from Boston Beer, hard seltzer. This, of course, has been a very, very challenging division here for the company. It's been losing its appeal with customers now for quite some time-- nothing new there.

But it looks like it's going to take Boston Beer quite some time to get back any of that momentum, and if it ever can. Taking a look at what sales could potentially look like this year, we're talking about a drop of 10% to 15% this year. This is also coming off a year where this category was clearly, clearly very weak.

So the weakness there is why this company is doing everything it can to revamp this part of the business ahead of what they call peak seltzer season. So think spring, summer, when people, I guess, are more inclined to buy their seltzer. So part of this relaunch, they are expanding Truly Vodka Seltzer as Truly Vodka Soda. I don't know if that's going to be enough to do the trick, though. That's scheduled to roll out this April here. So we'll see whether or not some of that rebranding helps sales of Truly Hard Seltzer there.

The third takeaway, enough of the bad news. Let's talk about one of the highlights of this report, one of the only highlights in this report, and that is Twisted Tea, a clear winner here for the company. Boston Beer saying that it is the number one in growth in all of, quote unquote, "beer" in 2022. So what's driving that? A number of things.

On the earnings call, CEO David Berwick saying that it was four things-- effective brand building, campaign here, growing annual college football tailgate program to extend the season here, improve distribution of 12 packs, and also improved service levels there. All of that factoring into what was a very, very strong quarter there for Twisted Tea.

So wrapping this all up, taking into account the large drop that we're seeing on the Street today when you look at the stock's reaction, Wall Street's reaction, you can sum it up as they were pretty unimpressed, right? You had Morgan Stanley, RBC, both slashing their price targets on the stock. Bernstein actually downgraded Boston Beer to underperform, writing in a note this morning, quote, "Twisted Tea's stellar growth is insufficient to offset that decline of and uncertainty around Truly's near-term performance."

So lots of speculation, lots of concerns about what we could potentially see here from that Truly division, hard seltzer division in the near term. So clearly, Boston Beer needs to do something to turn around the business. We'll see whether or not the revamp, that strategy that they laid out yesterday, that that's going to do the trick, Rachelle.

RACHELLE AKUFFO: And as you mentioned there, investors unimpressed there, especially as we look at how it's tanking the stock at the moment, down almost 13%-- ouch. Seana Smith, thank you so much.