Release Date: May 08, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Traeger Inc (COOK, Financial) reported first quarter sales of $145 million and adjusted EBITDA of $24 million, both at the high end of guidance.
- The company achieved a significant 700 basis points of gross margin expansion, reaching a quarterly gross margin of 43%, the highest since becoming a public company.
- Traeger Inc (COOK) has seen four consecutive quarters of gross margin expansion, driven by improvements in cost environment and company-specific initiatives.
- Despite a challenging demand environment, the company reaffirmed its financial guidance for fiscal 2024, indicating confidence in its strategic plans and execution.
- Traeger Inc (COOK) was named one of the most innovative companies by Fast Company, highlighting its commitment to disrupting the outdoor cooking industry.
Negative Points
- First quarter revenue declined by 5% year-over-year, with grill revenue down 14% due to lower sell-through at retail and a lower average selling price.
- Consumer demand for grills remains soft, with a shift in consumer spending away from durable goods like grills, which were over-indexed during the pandemic.
- The company is facing pressure on higher Average Selling Price (ASP) skews from a sell-in perspective, comparing against significant load-in from the previous year.
- Traeger Inc (COOK) anticipates that consumer demand for grills will remain soft for the balance of the year, assuming a challenging market environment.
- Net loss for the first quarter was $5 million, although this was an improvement from a net loss of $11 million in the first quarter of the previous year.
Q & A Highlights
Q: What was the breakdown in grow revenue declines between units and price?
A: Dominic Blosil, CFO of Traeger Inc, explained that the decline in average selling price (ASP) was in the high single digits, while the decline in units was more moderate, in the mid-single digits.
Q: How do you view the return to grill growth domestically in terms of replenishment versus new customers?
A: CEO Jeremy Andrus noted the current soft environment and difficulty in distinguishing factors affecting sales. He anticipates the end of pull-forward demand from 2021 soon and expects a normalization in replacement cycles by 2025, focusing on both new and existing customers with an emphasis on markets with low unaided awareness and penetration.
Q: Can you expand on the strategic pricing plan mentioned?
A: Jeremy Andrus elaborated that the strategy includes promotions on older products as new ones are introduced, and adjusting pricing based on consumer sensitivity in the current economic climate. This approach is integrated into their guidance and aims to maintain competitive positioning without compromising brand perception.
Q: How does the macroeconomic environment influence your product launch timings?
A: Andrus clarified that product launches are planned independently of macroeconomic conditions, focusing instead on seasonality and retailer schedules. He emphasized consistency in investment and launch timing, with promotions used strategically to manage inventory ahead of new releases.
Q: What is the expected impact of sunsetting older products on financials?
A: CFO Dominic Blosil mentioned that sunsetting products primarily affects volume, leading to pronounced deleverage in Q3, which is typically their lowest sales period. This is factored into their reaffirmed gross margin guidance for the year.
Q: Have you observed any changes in consumer purchasing behavior towards grills?
A: Dominic Blosil observed a shift in consumer behavior, with increased purchases of grills under $1,000, indicating heightened price sensitivity. Traeger is responding by adjusting promotions to remain competitive while adhering to their strategic pricing framework.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
