What happened
Shares of Oatly Group (OTLY 2.42%) were down 10% as of 1:52 p.m. ET on Monday after delivering disappointing third-quarter financial results. Management also guided for lower sales than what was expected for the full year.
After robust demand last year, Oatly has seen demand slow this year, which has sent the stock down 72%.
So what
On the surface, the company's revenue performance wasn't too bad, with constant-currency revenue up 16% year over year. But this was well off the pace of 49% growth in the year-ago quarter.
The good news is that the brand's premium pricing doesn't appear to be causing lower demand. Management noted that they are seeing minimal price elasticity globally, demonstrating the power of the brand.
The main problems were pandemic restrictions in Asia and production challenges in the Americas. On the positive side, management remains focused on making decisions to drive long-term growth, including moving to improve the supply chain network in the near term.
Now what
Oatly believes it still has a lot of international expansion ahead and opportunities to convert more dairy consumers to plant-based products. For now, the priority is to improve profitability. Management expects the cost savings initiatives to kick in over the course of 2023.
The company will need to keep revenue growth stable in the double-digit range and show improving profitability before the stock moves higher again. Management believes the issues they face are temporary, but with management reducing its growth forecast to between 9% to 12% year over year for 2022, investors should expect to see further volatility with the stock.
