Beyond Meat Inc. (BYND 0.35%) continues to struggle with its mission of delivering "the future of protein" amid weak sales and large recurring losses. That trend continued as the plant-based meat leader posted its latest earnings report on May 8.
The market remains skeptical that the company can manage a growth rebound. The stock is now down more than 40% over the past year.
Is now the time to buy Beyond Meat, or are investors better off leaving this one off their plate?
A recap of Beyond Meat's Q1 earnings report
For the first quarter of 2024, Beyond Meat's revenue fell by 18% year over year to $75.6 million, marking the eighth consecutive quarter in decline.
The top-line weakness was driven by a 16.1% decrease in the volume of products sold despite an effort to stir up demand through promotional discounting. The company also cited the impact of discontinuing its "Beyond Meat Jerky" along with lower "Beyond Chicken" sales, against large initial orders from Europe in early 2023.
Demand was sluggish across all core products including Beyond Meat burgers, steak, and chicken in the U.S. and the international segment.
That dynamic pushed the gross margin down to just 4.9% this quarter, well below the 6.7% figure in Q1 2023.
The company has made an effort to reduce costs. Total operating expenses declined by 11% year over year, which includes a large round of layoffs among non-production employees as well as a pullback in marketing spend.
The result is that the adjusted EBITDA loss of $32.9 million, or -43.5% of revenue, at least narrowed compared to the loss of $45.8 million or -49.6% adjusted EBITDA margin in the prior year quarter.
Image source: Getty Images.
Beyond Meat is still confident of a turnaround
There aren't many green shoots for Beyond Meat investors to get excited about.
Still, company management is projecting some optimism, working to position 2024 as a turning point toward a more sustainable and profitable operation.
A key strategy initiative this year is the launch of "Beyond IV", the fourth generation of Beyond Burger and Beyond Beef, seen as healthier with an improved taste. A new marketing push is expected to highlight the more premium ingredients with higher protein and less saturated fat per serving.
Beyond Meat Chief Executive Officer, Ethan Brown noted a positive early reception among customers. From the earnings conference call:
As the Beyond IV platform rolls out to more stores, we are pleased with the positive though still anecdotal feedback is receiving from consumers, as well as members of the health and wellness community, including nutritionist and dietitians.
For the full year 2024, the company expects net revenues in the range of $315 million to $345 million. If confirmed, the midpoint guidance represents a decline of around 4% from $343.3 million in 2024.
The expectation is that trends improve into the second half of the year, benefiting from the rollout of Beyond IV products. Pricing changes and a shifting sales mix are seen as supporting a higher gross margin.
Significant challenges remain for Beyond Meat
As is often the case, executing an effective turnaround strategy is easier said than done.
One challenge is the highly competitive landscape for meat substitute products. Offerings from companies like privately held "Impossible Foods" or even traditional packaged food giants like Kellanova (K 0.76%), through its "Incogmeato" brand, mean consumers have more options than ever.
At the same time, the plant-based meat industry is dealing with weaker-than-expected demand, with some consumers questioning the perceived health benefits. The volatile economic backdrop isn't helping.
The more pressing issue for Beyond Meat will be dealing with its balance sheet debt position which has reached $1.1 billion.
While liquidity with $173.5 million in cash appears stable in the near term, the prospect of further losses and negative free cash flow represents a key fundamental weakness.
Is Beyond Meat stock a buy today?
Beyond Meat is likely to remain volatile, with a poor outlook pressuring the stock. Even with shares trading sharply lower over the last few months, I haven't seen enough to believe that they've bottomed out.
