There might not be too many things worse for soda drinkers than a flat beverage, but for investors there are things worse than a flat performance. SodaStream (NASDAQ:SODA) reported ugly quarterly results on Wednesday morning.
Revenue fell 25% to $126.5 million during the holiday quarter, slightly worse than the 24% drop analysts had forecast. The company behind the namesake maker of carbonated beverages did come through with an adjusted profit of $0.35 a share -- up nicely from the $0.03 a share it posted a year earlier and the $0.18 a share Wall Street was targeting -- but that's still far less than the $0.45 a share SodaStream earned two holiday quarters ago.
It should also be emphasized that we're talking about adjusted profit. The company took a laundry list of charges covering everything from inventory charges to writing down a 2011 acquisition to costs involved in moving production out of a controversial plant in the disputed West Bank settlement. It was a mess.
SodaStream on the ropes isn't a surprise anymore. Stateside sales slipped in late 2013, and by the latter half of 2014 even its core European sales were slumping. Asia-Pacific was the only region to post year-over-year growth in Q4, and the 11% uptick there was more than offset by a 7% slide in Europe and a 49% free fall in the Americas.
The only silver lining in assessing its product performance was a 17% uptick in carbonator refills. It's encouraging to know folks are still using their SodaStream devices. Unfortunately, the number of soda makers and flavors sold during the holiday quarter plunged 34% and 38%, respectively.
The market wasn't impressed. The stock was down 8% by 10:45 a.m. A bad holiday quarter could have been saved by an upbeat outlook, but SodaStream didn't offer any near-term encouragement on that front. It anticipates continuing year-over-year declines through the first half of 2015, and while it sees things starting to turn around during the latter half of the year, revenue appears set to clock in lower for all of 2015. Analysts had been holding out for a modest improvement.
Good riddance, 2014
SodaStream realizes that it messed up in 2014. It got too greedy when it jacked up prices on its flavors from $4.99 a bottle to $7.99, with energy drink syrups going up to $9.99. That disrupted the value proposition of the product even as consumers are turning away from flavored sodas.
With flavor prices out of sync with reality it's no surprise SodaStream starter kits are collecting dust on retailer shelves. SodaStream late last year shifted its marketing message. Instead of promoting the novelty of having a soda fountain at home it's going with a "water made exciting" slogan that promotes the health benefits of consuming sparkling water.
The next few quarters will be rough at SodaStream. You just don't bounce back when a trendy product falls out of favor, and that is certainly happening in the U.S. with sales in the Americas shaved nearly in half. However, with the stock already having shed more than three-quarters of its value since peaking two summers ago, one has to wonder if the near-term negativity is already factored into the price. SodaStream blew it in 2014, and unfortunately 2015 isn't off to a very good start.