National Beverage (NASDAQ:FIZZ) recently kicked off a new fiscal year that management hopes will mark the beginning of a turnaround for the struggling business. The beverage specialist, whose La Croix sparkling water brand powered huge sales and profit growth as the industry expanded, is now seeking stability following declining demand over the last six months.

Its latest earnings report contained a few encouraging signs on that potential rebound but also highlighted the difficulty of gaining share in a market that's flooded with competitors.

Let's take a closer look.


Q1 2019

Q1 2018



$264 million

$293 million


Net income

$35 million

$49 million






Data source: National Beverage's financial filings.

What happened this quarter?

Sales trends were in negative territory for the third straight quarter and declines sped up over the seasonally strong summer months. However, National Beverage notched a few wins, including higher selling prices and robust cash flow.

Two glasses of iced sparkling water with lime wedges.

Image source: Getty Images.

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

  • Sales decreased 10% compared to 2% last quarter and 4% growth during the wider 2018 fiscal year. The drop came entirely from its "power brands" segment that includes the La Croix franchise. This division saw 16% lower sales volumes, which was partly offset by a 4% jump in the company's carbonated soda drinks.
  • Average selling prices inched higher due to management's price boosts in response to rising aluminum costs. However, the falling case volumes ensured that gross profit margin tumbled anyway, dipping to 36.6% of sales from 39.5% a year ago.
  • Selling expenses were roughly flat but rose as a percentage of sales. As a result, operating profit fell to $45 million, or 17.2% of sales, from $64 million, or 21.8% of sales.
  • National Beverage remained in solidly positive cash flow territory, with operating cash landing at $51 million compared to $59 million a year ago. The company had just over $200 million of cash on the books as of late July.

What management had to say

As has become National Beverage's custom following the negative investor response to comments in its early April earnings release, management kept its discussion brief and a bit vague. Executives highlighted the fact that sales and net income have improved compared to the prior quarter -- but not the year-ago quarter -- saying this increase reflects "La Croix's significant stair-step influence returning to a more positive directional position."

Management noted a few other hard-to-quantify trends that they say show support for their rebound efforts. La Croix's latest social media campaigns are attracting hundreds of millions of impressions, for example, and new flavor releases like Hi-Biscus are finding traction. The Pamplemousse launch has "reached iconic status," executives said, with help from several appearances on late-night talk shows. "We want to thank our loyal and dedicated consumer base that applauded the launch of our Hi-Biscus," management said.

Looking forward

With the consumer products specialist's sales volumes still slumping, it's hard to predict when National Beverage might return to growth in the key La Croix brand. Negative press last year combined with surging competition to open the door to rivals, and that situation seems to have knocked it from its privileged position in the industry.

Still, the company is generating plenty of cash and is debt-free, giving management flexibility and time to support its brands with marketing and new product releases while engaging in share buybacks that take advantage of the 44% drop in the stock price so far in 2019.

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