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Boston Beer earnings miss after betting big on seltzer, stock slides

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Yahoo Finance Live anchors discuss second-quarter earnings for The Boston Beer Company.

Video Transcript

JULIE HYMAN: So we have the opening bell here on this Friday morning. As I mentioned, it looks like we could be poised for a positive week on the major averages, after a down week last week. We've sort of been alternating up and down weeks here for the major averages as we've headed through July and into earnings season. And sort of week by week and day by day, the narrative and the mood of investors changes as we try to figure out if we've, indeed, priced in recession, if we've priced in an earnings downturn, AmEx notwithstanding.

- Yes.

JULIE HYMAN: You know, and I think this next stock is a really good example of the other side of the equation, right? It is-- maybe you're spending, if you're an AmEx customer and you're in a financial position to do so, you're going on those trips, you're staying at those hotels. Maybe if you're drinking this particular beverage, you're not? I don't know. I'm talking about Boston Beer, guys. And Boston-- wait a minute, is that right?

- Yeah.

JULIE HYMAN: The shares are higher now?

BRIAN SOZZI: I'm--

JULIE HYMAN: How is that possible?

BRIAN SOZZI: It's shocking. Let's just wait for this to clear out because this photo is another Snap-like disaster from this company. And this has been a rolling trainwreck from Boston Beer going on the past three quarters now. Conference call was really bad. Truly losing market share. They clearly have too much inventory in the market of Truly.

JULIE HYMAN: No, that's as of yesterday. Yeah, it hasn't opened this morning yet.

BRIAN SOZZI: Yeah, I mean--

JULIE HYMAN: I imagine-- you know what I bet is going on, you guys? I bet that there was a pause for volatility at the open for this stock because the downward leg is so large that sometimes you get volatility halts being triggered. That could be potentially what's going on with Sam because we were seeing-- how much was the stock down in--

- 5%

JULIE HYMAN: --free market?

BRIAN SOZZI: Yeah.

- Yeah.

JULIE HYMAN: That's it?

- Right now, it's looking like 5%.

[INTERPOSING VOICES]

Right. So I guess that now we're seeing a little bit of an opening trade here for Boston Beer. But this is a company that's really been struggling all year. We've talked-- this is not the first time we've talked about an earnings miss from Boston Beer, that the company has just been having trouble, sort of, weathering this time. It's one of the companies that made missteps when it came to seltzer, right? Betting big on the hard seltzer trend that has sort of fizzled, gone flat--

BRIAN SOZZI: Oh.

JULIE HYMAN: --if you will.

BRIAN SOZZI: Get this. Here's a not so fun fact from the call. The CEO saying, "We"-- Dave Burwick-- "We have adjusted down our category volume growth for hard seltzer from between flat to plus 10% this year to down between 15% and 20%."

JULIE HYMAN: Yeah.

BRIAN SOZZI: That is a major reversal in your business. I could sum up this conference call really with one-- essentially one line. People just not liking Truly anymore. They're drinking other stuff. They just don't want Truly in the fridge.

- There's a story that's long been at play with companies like Boston Beer Company, and it's all about depletions and how quickly they're moving through their inventory. The depletion rate for the second quarter had actually decreased. So that is a bad thing. 7% from the prior year, reflecting decreases in the Truly hard seltzer, Angry Orchard, Sam Adams, Dogfish, the list goes on. But excluding some of the Truly declines as well, the depletion volumes for the remainder of the business in the second quarter, that increased 14%

And so this is essentially the rate of how quick they're actually moving through their inventory, which the shipment volume for the second quarter, 2.4 million barrels, 1.1-- 1.1% decrease from the year prior. And so all of this considered, it's really how quickly they can continue to move through inventory, find some of the larger business to business partners beyond just the consumers like ourselves, who are saying, oh my gosh, recession, I got to think about that? Let me go get a drink. You know, I think it's really coming down to how quickly they can move through everything that they are producing at this point in time and getting that out the door as well.

JULIE HYMAN: Maybe they just got to start giving away the Truly. I don't know.

JULIE HYMAN: Yeah, look, I see the trends changing with our own crew. My friend Pal, I mean, he used to drink Truly all the time. I mean, now she's back to Bud Light. I grabbed a drink last night with our senior auto correspondent Pras Subramanian. He was drinking High Noon hard seltzer, not Truly.

JULIE HYMAN: Oh, interesting.

BRIAN SOZZI: Not Truly.

JULIE HYMAN: I didn't think Pal used to drink hard seltzer.

BRIAN SOZZI: That's what I'm rolling with right now.

JULIE HYMAN: I thought she was a Bud Light girl. Anyway.

- Pras likes a good whiskey, too.

JULIE HYMAN: The-- overall, the earnings per share forecast for the year is really what caught my eye as well, the cut, the slash to that. The new earnings per share forecast for the year is 6 to 11 bucks. It had been 11 to 16.

BRIAN SOZZI: Yeah.

JULIE HYMAN: That's pretty bad.

BRIAN SOZZI: It sounds like maybe a potential shake-up in the C suite at some point.

- Yeah. All right, we're going to keep track of shares of SAM.