What happened
Shares of Tattooed Chef (TTCF) crumbled on Wednesday after the packaged-food company announced its financial results for the third quarter. But the market's reaction was a bit puzzling considering the company had already made some key announcements prior to the release of its quarterly numbers. As of 12:30 p.m. ET, Tattooed Chef stock was down a whopping 20% and even hit an all-time low early in the session.
So what
For Q3, Tattooed Chef generated revenue of $54 million, down 6.7% from the same quarter of last year. That top-line decline was particularly disappointing considering that over the past year, the company has acquired other companies, launched new product lines, and increased product distribution. In other words, there are more Tattooed Chef products available to consumers than ever, but that's not translating into greater sales.
The growth of Tattooed Chef's business hasn't led to greater sales, but it has led to greater expenses. The company recorded a net loss of $38.5 million in Q3 compared to a net loss of $8.2 million in the prior-year quarter.
Now what
Many headlines say that Tattooed Chef lowered its guidance Wednesday, but that's not accurate. Previously, the company had been forecasting 2022 revenue in the range of $280 million to $285 million. However, its guidance cut came on Nov. 10, when it lowered its revenue expectations for the year to a range of $235 million to $245 million. Also at that time, it cut its outlook for full-year gross profit margin. Previously, it had expected its margin would land in the 8% to 10% range, but now, management is guiding for a range of between 0% and 3%. Neither of those ranges was adjusted Wednesday.
Management is optimistically talking about Tattooed Chef reaching positive cash flow by 2024. But that's a really long way off for a company that only has $14.2 million in cash on the books as of this writing. It intends to finance operations in the interim with a to-be-announced debt offering, but the terms for that offering will likely not be favorable to the company.
Personally, I think it's going to be a long year or more for Tattooed Chef shareholders, and I see little chance of the stock beating the market over that time. If you are on the sidelines, I wouldn't recommend jumping into this stock today.
