(Montreal) Despite the context of inflation in food products, Guru had to compete with its competitors who lowered the price of their energy drinks.
This price war dampened the growth of consumer purchases from Guru during the months of December and January. “Red Bull benefited significantly from these price cuts in December,” Guru President and CEO Carl Goyette said at a Thursday conference with analysts to discuss quarterly results. It continued in January and Monster was also aggressive with its prices in January. »
The Quebec company that relies on its plant-based ingredients as a selling point had no choice but to reduce its prices to protect its market share. “We’re more in tracking mode for pricing, we don’t tend to initiate a promotion. This is not how we build our brand, we rely on the quality of our ingredients, but we are not going to let our competitors eat away at our market share. If we have to react, we will. »
Guru’s sales decreased to 5 million from 7 million for the same period last year for the first quarter, ended January 31. This decline is explained by a “transition period” related to its contract with PepsiCo, which has provided Canadian distribution of Guru’s products since October 2021.
PepsiCo has decided to reduce its warehouse inventory from the initial order threshold. The agreement with the food giant allowed Guru to cover a larger market, but the implementation of the agreement led to greater volatility in quarterly results.
Mr. Goyette believes that the situation has stabilized. “Inventory equals approximately six weeks of sales. We didn’t have perfect visibility last year, but inventory was around nine to ten weeks. »
Despite lower revenue, net loss narrowed in the first quarter as the company cut advertising spending.
The net loss reached 2.6 million, compared to a loss of 3 million in the same period last year. Diluted loss per share was 8 cents, down from 10 cents.
The loss is thus smaller than analysts had anticipated, even if sales are lower than expected. Prior to the earnings release, analysts had expected a loss per share of 10 cents and revenue of 6 million, according to financial data firm Refinitiv.
CIBC World Markets analyst John Zamparo believes the results bode well for achieving profitability. “The good news we see in these quarterly results is that the reduction in expenses could possibly bring the company closer to being profitable. »
Mr. Goyette, however, explained that the decrease in expenses was explained by the launch of a new drink at the same time last year. “We launched Guayusa (flavor) last year. There was a major promotional effort, because it made sense. There we are saving some money to support the launch of the next innovation in the coming weeks. »
Guru’s stock lost 4 cents, or 1.23%, to $3.21 on the Toronto Stock Exchange in the afternoon.
Company in this post: (TSX: GURU)