National Beverage (NASDAQ:FIZZ) recently closed out a difficult fiscal year that saw sales growth slow as earnings took a rare step lower. Consistent with its last two quarterly announcements, the company's fiscal fourth-quarter report contained evidence of competitive struggles; the maker of LaCroix sparkling water faced a crowded market and negative press about its product quality. Meanwhile, profit was hurt by rising manufacturing and input costs that couldn't be completely passed along to consumers.

Let's take a closer look:


Q4 2019

Q4 2018



$240 million

$244 million


Net income

$26 million

$36 million


Earnings per share




Data source: National Beverage.

What happened

Sales in the quarter dropped year-over-year but showed a slight improvement when compared to the prior quarter. This suggests stabilization ahead.

A hand holding a glass of sparkling water

Image source: Getty Images.

Here are the key highlights of the quarter and the fiscal year that just closed:

  • Sales declined 2% in the quarter. This compares to a 3% drop last quarter and a 7% gain in the fiscal second quarter. The slump caused sales growth to fall to 4% in fiscal 2019, compared to 18% last year.
  • Volume gains in the company's core brands, which include La Croix, slipped to 5% in fiscal 2019 from 39% a year earlier.
  • Gross profit for the quarter fell to $85 million, or 35% of sales, from $99 million, or 41% of sales, a year ago. The decrease was due to a combination of tariff-based cost increases and slower volume growth.
  • Rising marketing spending helped push expenses up at a faster rate than sales. As a result, pre-tax profits fell to $184 million for the year, or 18% of sales, compared to $205 million, or 21% of sales, in fiscal 2018. Nevertheless, the quarter's 28% decline in net income marked an improvement over the prior quarter's 40% drop.

What management had to say

In contrast to the prior quarter, management didn't blame negative press -- about the ongoing lawsuit alleging unnatural ingredients in LaCroix products -- for the sales shortfall. Executives instead focused their comments on the brand's big-picture strengths. "LaCroix uniquely defined the sparkling water category," management said in a press release. The franchise's success "resulted in an expansion of significant retail space for the category," they continued, "bringing more choice to consumers."

Looking forward

The company is struggling to stand out in that crowded retailing space, so National Beverage's 2020 plans reflect a sustained effort to get back into consumers' good graces. To that end, the new fiscal year will include launches of additional LaCroix flavors, an expansion into the U.K., and an aggressive summer marketing campaign.

While hurting profitability, that advertising boost should help support a return to sales growth in the next few quarters. The business should also benefit from reduced capital expenditures, now that management's capacity-expansion initiatives are winding down. However, in a selling environment impacted by a flood of competition and spiking costs on key inputs like aluminum, only time will tell whether National Beverage can recapture its past levels of profitability.

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