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Sonos misses on Q3 earnings, slashes revenue guidance

Yahoo Finance Live anchors Brian Sozzi and Brad Smith break down Sonos’ most recent earnings report and how it’s driving down the stock.

Video Transcript

[AUDIO LOGO]

BRIAN SOZZI: Welcome back. We are moments away from the opening bell on Wall Street. And it could be another open in the green. But Brad, let's start with picking apart some earnings reports. Let's tune in-- let's tune in now to Sonos. Tough, tough quarter. And I think it surprised a lot of folks on the Street. And you can see the shares down 17%.

Really surprised a lot of folks because in the first half of this year, really towards the end of the first quarter, Sonos saw strength, by and large, in that high-income consumer. And we had CEO Patrick Spence, he came on here and he said, look, that high-end consumer is coming in and they continue to spend, and spend well.

But there was a different tone on this conference call from Patrick and his team, noting that sales started to slow down around June, which is very interesting. Notably, within their new Roam product. And it doesn't appear that trend has stabilized. So Sonos out here, cutting its full-year guidance. Also pushing out some 2024 sales and margin guidance it put out there a couple months ago.

BRAD SMITH: A couple of things at play here, shift from goods and services, number one. If-- and kind of combined with that, too, you have less people that are spending into that hybrid-work model type of experience and really buying into or spending specifically for their home experience. And so that's where Sonos had seen one of its biggest opportunities for growth.

And so now, a year removed from the heaviest portions of that spending, you got revenue decreasing 1.8% year-over-year, came in at $371.8 million. And then additionally here, you think about the company and what they're saying, specifically about the macroeconomic backdrop, saying it became significantly more challenging for us starting in June as the dollars appreciation and high inflation adversely affected the consumer.

And so this is a far different profile or type of consumer in terms of their spending aperture at this point in time. And in this quarter, reflected. Now, the big question moves to where they see opportunity going forward from this point. They've also got a CFO changeover that's going to be coming as well. Brittany Bagley, the company's chief financial officer stepping down as well.

BRIAN SOZZI: Yeah, I think all that fits nicely, Brad, with this note, at our Brent-- Phil, a friend of ours, [? well, ?] programming on Sonos. He's maintaining a buy rating on Sonos. But he does say this, quote, "We were wrong to believe Sonos would be more insulated from consumer weakness due to exposure to a higher end consumer." So interesting nugget there. Also said, "Pressures on Sonos are macro-related and not the result of competition."

So you would think, once the dust settles, once perhaps consumer spending stabilized a little bit, you could see the Street go back to a name like this. Because it's not like Sonos is getting beat over the head by Apple and it's terrible HomePod or, let's say, what's coming out of Amazon in its home-related offerings. Sonos is still seen as a winner in this market.

BRAD SMITH: Well, both of those products are going to be discounted anyway going into the holiday season.

BRIAN SOZZI: [? Both ?] are bad.

BRAD SMITH: Well, yeah, it was late to the market, too.

BRIAN SOZZI: So bad.