Shares of Beyond Meat (BYND 10.57%) were moving higher today after the company reported preliminary third-quarter earnings, announced layoffs and further cost cuts, and lowered its full-year revenue guidance.
While the numbers were worse than prior expectations, the stock still jumped on the news, trading up 16.2% as of 1:22 p.m. ET.
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Investors cheer the cost-cutting plan
Beyond Meat said that revenue for the third quarter was expected to be approximately $75 million, representing a decline of 9% and worse than estimates at $87.9 million. It also forecast a negative gross profit of $7 million to $8 million, showing the business continues to look structurally broken.
Nonetheless, the company still expects positive free cash flow in the quarter of $7.6 million due to efforts to reduce cash consumption, but it expects negative cash flow in Q4.
What seemed to give the stock a boost was a new cost-cutting plan, including a 19% reduction in its corporate workforce, a review of its pricing strategy to boost gross margin, and other changes designed to improve the business.
NASDAQ: BYND
Key Data Points
More trouble ahead
For the full year, the company lowered its revenue forecast to $330 million-$340 million, a decline of 19%-21% with break-even gross profit.
At this point, the stock has fallen so far that investors are eager to grab on to any news that could signal a potential turnaround, but the challenges facing the company are starting to seem insurmountable.
The economics of the business seem fundamentally flawed if it can't generate a gross profit, and Beyond Meat is operating in a highly competitive industry, where it has no pricing power. Therefore, it's going to take more than a cost-cutting plan to save the business at this point.
