Shares of Weber Inc. rallied in active trading Monday, after the outdoor grill maker announced a plan to cut costs and preserve liquidity as rising inflation and supply chain disruptions have led to slower retail traffic and yet another wider-than-expected loss.
shot up as much as 21.2% in intraday trading before paring gains to close up 5.4% at $7.29. Trading volume swelled to 3.7 million shares, compared with the full-day average over the past 30 days of about 568,400 shares.
The stock has now gained 17.4% since closing at a record low of $6.21 on Aug. 1, but was still trading 47.9% below its initial public offering price of $14.
The company reported before Monday’s open that it swung to a fiscal third-quarter net loss for the quarter to June 30 of $7.5 million, or 41 cents a share, from net income of $17.8 million in the same period a year ago. (There are no per-share results available last year since the company went public in August 2021.)
The losses were much wider than the average analyst per-share loss estimate of 7 cents, according to FactSet. That was the third-straight quarter that Weber has reported a wider-than-anticipated loss.
Sales fell 21.1% to $527.9 million, which topped the FactSet consensus of $526.2 million.
Meanwhile, costs of goods sold (COGS) increased 1.2% to $374.3 million, as gross margin contracted to 29.1% from 44.7%.
In late July, Weber warned that third-quarter sales would fall into the $525 million-to-$530 million range, which was below expectations at that time of $532.7 million, because of pressures from inflation, rising fuel prices and supply-chain challenges. The company also announced at that time that then-Chief Executive Chris Scherzinger was leaving the company.
Weber said when it issued its sales warning that it was pursuing a number of financial transformation initiatives, that included the suspension of its quarterly dividend and may include workforce cuts.
On Monday, the company said it initiated the plan, which it believes will provide a “cash benefit” of at least $110 million in fiscal 2023, with a “run-rate benefit” beyond that.
Here are the core components of the plan:
- A dividend suspension. The company has spent about $6.4 million on dividend payments over the past nine months, with the last quarterly dividend of 4 cents a share paid out on June 17.
- A “focused” reduction of COGS and selling, general and administrative (SG&A) expenses.
- A reduction in workforce that removes management layers in the organization.
- The tightening of global inventory levels, and working capital positions.
“Our third-quarter performance reflects the margin pressures we are experiencing as a result of global headwinds in our current operating environment,” Interim Chief Executive Alan Matula said. “To strengthen our financial position for fiscal year 2023 and beyond, we are introducing a comprehensive cash flow and cost management plan, which will position Weber to enhance its leadership position in a dynamic outdoor cooking market.”
The company said it planned to cut capital expenditures, which should save at least $30 million in fiscal 2023, and its workforce reduction is expected to save at least $20 million next year.
To ease supply chain constraints, the company has implemented a “Make Where We Sell” strategy, which should cut manufacturing and transportation costs, improve customer service and diversify its global manufacturing footprint.
Weber’s stock has tumbled 43.6% year to date, while shares of fellow grill maker Traeger Inc.
which went public a week before Weber, have plunged 69.2%. In comparison, the S&P 500 index
has lost 9.8% this year.
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