Beyond Meat has warned of a larger than expected decline in third-quarter revenues due to the Delta coronavirus variant in the US and labour shortages in the retail sector.
Shares in the plant-based food producer fell more than 11 per cent on Friday after it cut net revenue guidance to $106m, down from its previous estimate of $120m to $140m, acknowledging that “the deceleration was larger than anticipated”.
The California-based company pointed to the effects of the Delta variant and said the decline in retail orders from a Canadian distributor, which came as restaurants reopened, had lasted longer than expected.
It also said labour shortages were causing delays in shelf restocking among its retail customers. Severe weather that led to the loss of drinking water in a Pennsylvania facility and water-damaged inventory in another plant also meant that it could not fulfil orders.
The company’s shares have fallen more than 20 per cent since the start of the year as investors worry about increased competition in the plant-based category, with large food companies and meat processors launching their products and more start-ups entering the market.
Beyond Meat’s competitor Impossible Foods has been increasing its retail presence this year, with price cuts for shoppers. In the US, retail sales in the alternative meat sector rose 40 per cent in the four weeks to September 10 from a year ago, according to Nielsen data, but Beyond Meat lost 60 basis points in market share, while Impossible Foods rose 270bp.
Beyond Meat said that growth in orders from international customers had partially offset the sales declines. While the new sales estimate is 12 per cent higher than the same time last year, it said it continued “to study the drivers behind this quarter’s performance”.
Arun Sundaram, analyst at CFRA Research said the company’s comments seemed to reflect its inability to pinpoint what the cause of the sales decline was. “It seems like they don’t really know what’s going on with customer orders, why retail customers are not ordering from them any more and why food service customers are not ordering from them,” he said.
Although the macro environment such as the spread of the Covid variant and logistic issues continued to create uncertainty for investors, the lack of clarity about customer orders were “going to worry investors a lot more” he added.
The company has a deal with McDonald’s to produce its McPlant burger, with the fast-food chain starting trials in the US and Europe, but analyst do not expect the revenue uplift from the product rollout until next year.
Beyond Meat will report its third-quarter results on November 10.
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