What happened
Tattooed Chef (TTCF) stock fell on Friday even as the wider market was flat. Shares declined 17% by 1 p.m. ET, compared with a 0.6% uptick in the S&P 500. That drop added to big short-term losses for owners of the plant-based food product specialist, which is down nearly 80% so far in 2022.
It was sparked by a disappointing outlook by the management team that put the company's 2022 profitability at risk.
So what
Management revealed in a pre-market press release that sales trends hit a negative inflection point over the past few months. Revenue fell 7% in the third-quarter period that ended in late September, compared with 16% growth in the previous quarter. Like peer Beyond Meat did earlier in November, Tattooed Chef described a major slump in the industry as consumers moved away from many plant-based foods.
The company also delayed the release of its detailed quarterly results even as it announced a major shift in its growth strategy away from launching new products and toward cutting costs.
Now what
Tattooed Chef is aiming to slash marketing expenses and raise prices in hopes of saving roughly $30 million over the next year. However, its operating results will look worse before they get better.
Management is projecting that sales in 2022 will now land at between $235 million and $245 million, down from its prior forecast range of $280 million to $285 million. Gross profit margin might be as low as 0%, too, executives said.
This forecast implies that the demand shift hurting the industry will likely persist into 2023. Several plant-based food companies may be forced out of the market by this move, and Tattooed Chef is trying, through cost cuts and price increases, to ensure that it survives the downturn.
It is possible that it will emerge with a much stronger brand position following that shakeout. But Wall Street chose instead to focus on the high likelihood of worsening earnings trends over the next few quarters.
