What happened
Shares of pellet-grill company Traeger (COOK 3.87%) fired up on Friday after the company reported financial results for the fourth quarter of 2022. Q4 results beat expectations, and Traeger stock is consequently up 24% as of 11:10 a.m. ET -- somewhat surprising considering management's guidance was below expectations.
So what
In Q4, Traeger generated revenue of $138 million, which was down 21% year over year but better than management's implied guidance of $117 million to $122 million. CEO Jeremy Andrus said, "We were pleased to see the consumer respond favorably to our efforts to drive demand during the holiday period."
For 2022, Traeger's revenue fell almost 17% year over year to $656 million. Sales of consumable pellets held up well, and sales of accessories were actually up thanks to an acquisition. But sales of its grills were down almost 35%. For context, Traeger's grills -- like the products of many premium consumer brands -- were flying off the shelves in the earlier days of the pandemic, but sales are now normalizing.
Over the past year, Traeger has been working to reduce bloated inventory, and it made progress in Q4. Compared to the third quarter, the company's inventories were down $8.3 million or about 5%. Management did rely on sales promotions to move inventory. But encouragingly, its gross margin held relatively steady at 34.5%.
Now what
For 2023, Traeger expects to generate revenue of $560 million to $590 million, a year-over-year drop of 10% to 15% and below consensus analyst estimates of $648 million, according to The Fly. Moreover, management is basically guiding for its gross margin and adjusted profitability to be flat compared to 2022.
In other words, one might say that Traeger's business is holding up well enough. But revenue is modestly dropping, and other business metrics are merely steady. That could limit the downside for Traeger stock, but it's hard to see a path to outperforming the market average in the coming year with financial projections like those.
