Earlier this week, Sonos reported disappointing revenue results for the fiscal third quarter ending July 2, which caused the share price to fall. Following the share price drop, Sonos stock has fallen 42% year to date, underperforming the S&P 500's drop of 11.7%.
The business has performed well since the pandemic began over two years ago. Sales initially dropped 17% year over year in the fiscal second quarter of 2020, before surging to double-digit growth rates through the end of that year. Sonos benefited from the stay-at-home environment, but macroeconomic headwinds in 2022 are starting to weigh on the company's revenue.
The company reported a revenue decline of 1.8% year over year for the fiscal third quarter. This follows strong performance in the previous quarter, when revenue increased 20% year over year. Management blamed the unfavorable appreciation in the U.S. dollar and inflationary pressures for the weak performance.
Management's guidance calls for revenue to grow 1% to 2% for the full year over 2021, reaching a range between $1.73 billion and $1.75 billion. However, investors might want to take the outlook lightly, since it is already lower than management's previous guidance. The fluid economic situation with high inflation makes the company's outlook a moving target right now.
Long-term investors should be encouraged by CEO Patrick Spence's statement in the press release, in which he expressed confidence in the company's growth path. "Although we cannot predict when macroeconomic conditions will normalize, we remain confident that, when they do, we will return to double-digit revenue growth," he said.
Sonos is a leading brand in the home audio category, and the business has a strong balance sheet with no debt, solid profitability, and a huge growth opportunity.