Tattooed Chef (TTCF -98.00%) investors had low expectations heading into the plant-based food specialist's fourth-quarter earnings announcement. The industry has lost some of the momentum it enjoyed during earlier phases of the pandemic, and consumers appear to be choosing more conventional food options. Beyond Meat, after all, recently said sales shrank 20% in the core U.S. market.
However, Tattooed Chef appears to be navigating the industry shifts better than Beyond Meat. Let's take a closer look.
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1. Good sales trends
There was no sign of weakness in sales trends through late 2021. Tattooed Chef's revenue was up 32% in Q4 to $52 million. Sure, that's a slowdown compared to the 44% spike that investors saw in the previous quarter. Yet the company's latest results put it near the high end of the forecast that executives issued in mid-November.
Revenue for 2021 landed at $213 million compared to the guidance range of $210 million to $215 million. CEO Sam Galletti cited "growing interest in our plant-based offerings" as a key factor driving those solid results.
Those comments contrasted a bit with Beyond Meat's description of consumers moving away from health-oriented food options in late 2021. It helped that Tattooed Chef stayed busy with menu launches, roughly doubling the number of products it sells and pushing into new categories like refrigerated snack bars and wood-fired pizzas.
2. Making money
The news wasn't nearly as good around profitability. Tattooed Chef's gross profit fell to just 2% of sales compared to 11% of sales a year ago. The biggest factor there was spiking transportation costs. But Tattooed Chef also booked temporary charges that shouldn't repeat. Management says they're confident that gross profit margin will rebound in the coming quarters, with help from higher-priced products.
The company's overall operating loss improved slightly for the quarter but ballooned for the full year, rising to $37 million from $10 million. Tattooed Chef spent lots of cash on acquisitions and on building a more vertically integrated manufacturing platform. The payoff from those moves should start accruing in 2022 and beyond.
3. Looking ahead to 2022
Speaking of 2022, management sees sales totaling between $280 million and $285 million, translating into roughly 33% gains. For context, revenue rose 44% in the 2021 year.
Investors would have preferred to see a prediction of accelerating sales gains, given Tattooed Chef's relatively small sales footprint. But the prospect of expanding profit margins and robust growth is still attractive, especially given the tougher demand environment.
Tattooed Chef is still a long way from demonstrating that it can generate sustainably strong earnings. But investors might still want to keep this stock on their watch lists as a good way to gain exposure to the plant-based consumer packaged foods niche.
