What happened

Shares of Boston Beer (SAM -1.66%) were falling today after the maker of Sam Adams and Truly hard seltzer reported disappointing bottom-line results in its fourth-quarter earnings report and offered weak guidance for 2023.

As of 1 p.m. ET, the stock was down 13.8% on the news.

So what

Though depletions in the quarter, which represent end-volume sales at the retail level, were only up 3%, shipments rose 16.7% and revenue increased 28.6% to $447.5 million as the company benefited from an extra week in the quarter, as well as higher prices. That revenue figure easily beat estimates at $393.7 million.

However, the company could not convert those additional sales into profits. Gross margin in the quarter increased from 28.7% to 37%, but that improvement was primarily related to weak results in the quarter a year ago from an unanticipated decline in hard seltzer sales. 

Management said that a change in product mix and supply chain inefficiencies weighed on margins, and as a result, the company lost $0.93 per share on a generally accepted accounting principles (GAAP) basis. That was much worse than expectations at a per-share profit of $0.70.

Chairman and founder Jim Koch said, "Although near-term trends remain challenging because of the hard seltzer category's trajectory, we have strong brands across multiple segments, the top sales force in beer, and a highly cash-generative business with a strong balance sheet."

Now what

Looking ahead to 2023, Boston Beer also disappointed the market with its guidance as the company sees a depletions decline of 2% to 8% for the year, likely indicating that revenue will be lower. It also expects GAAP EPS to come in at $6.00 to $10.00, an improvement from $5.44 in 2022 but below the analyst consensus at $11.02.

The guidance makes it clear that Boston Beer is still coping with the fallout in the hard seltzer category, and the stock still trades at a premium, meaning investors had been expecting a recovery. Given that, it's not surprising to see the alcohol stock pulling back today.