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Laird Superfood Inc (LSF) Q1 2024 Earnings Call Transcript Highlights: Strategic Growth and ...

GuruFocus Research
·4-min read

  • Net Sales Growth: Increased by 22% year-over-year.

  • E-commerce Sales Growth: Grew 33% year-over-year; Amazon sales up 48%, DTC platform up 25%.

  • Wholesale Net Sales Growth: Increased by 10% year-over-year.

  • Gross Margin: Reached 40% in Q1, a 17 point improvement year-over-year.

  • Net Loss: Reduced to $1.0 million, 75% improvement from the previous year.

  • Cash Position: Ended the quarter with $7.3 million in cash, no debt.

  • Inventory Management: Reduced inventory by $700,000 or 11% from year-end 2023.

  • 2024 Full Year Guidance: Net sales projected at $38 to $42 million; gross margin projected at 30% to 41%.

Release Date: May 08, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

  • Laird Superfood Inc reported a 22% increase in net sales year-over-year, demonstrating strong growth across both e-commerce and wholesale channels.

  • E-commerce segment grew by 33%, with Amazon sales increasing by 48% due to improved inventory management and marketing effectiveness.

  • Direct-to-Consumer (DTC) business grew by 25%, with about half of the DTC business now consisting of subscription sales, enhancing customer retention.

  • Wholesale net sales increased by 10% year-over-year without a price increase, indicating efficient cost management and strong market demand.

  • Gross margin improved to 40% in Q1, a significant increase from the previous year, driven by strategic supply chain improvements and cost management.

Negative Points

  • Despite overall growth, the net loss for Q1 was $1.0 million, although it was a 75% improvement compared to the prior year.

  • The company experienced a planned write-down in the value of coconut milk powder, indicating potential issues in inventory valuation adjustments.

  • Marketing expenses, although reduced, still represent a significant cost at over 20% of net sales, indicating ongoing challenges in balancing growth and profitability.

  • The company's reliance on key e-commerce platforms like Amazon could pose risks associated with platform dependency and the need to continuously win the buy box against competitors.

  • While inventory was reduced by $700,000, this reduction needs to be carefully managed to avoid impacting product availability and sales potential.

Q & A Highlights

Q: Can you expand on what's been driving growth on Amazon, and has inventory fill been a component of that growth? A: (Jason Vieth, President & CEO) Yes, Amazon's growth exceeded our expectations, driven by strong performance across various segments, not just creamers. Key factors included improved inventory management, winning back the buy box, and effective advertising. The team's operational execution on Amazon has been exceptional.

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Q: Regarding the hydration business, which seems to be driven by the greens product, what are your plans to continue its growth? A: (Jason Vieth, President & CEO) The greens and the newly introduced daily reds are central to this growth. We plan to continue marketing these as the cleanest products on the market, which should attract more consumers. Our strategy includes strong marketing efforts and expanding distribution beyond online platforms.

Q: How has the reduction in promotional activities on the DTC platform impacted customer behavior? A: (Jason Vieth, President & CEO) Reducing promotions and focusing on a content-rich strategy has shifted our brand perception and increased subscriber base. About 50% of our DTC sales are now subscriptions, which offer the best value through consistent discounts, aligning with our goal to maintain a premium brand image.

Q: Can you discuss the improvements in returns and discounts and whether these improvements are sustainable? A: (Anya Hamill, Interim CFO) The improvement in returns and discounts is a result of a strategic shift in our promotional strategy, focusing on efficiency and consumer impact. This approach, particularly in our wholesale business, is expected to sustain throughout the year.

Q: What are your expectations for seasonal impacts on revenue throughout the year? A: (Anya Hamill, Interim CFO) Our business experiences seasonality, particularly in Q3 with our pumpkin and peppermint creamers. Additionally, events like Amazon's Prime Day also drive seasonality in sales, which we anticipate will continue to impact our quarterly performance.

Q: With the shift to less promotional activity, have you noticed any changes in customer churn or order frequency? A: (Jason Vieth, President & CEO) Despite less frequent sales, our shift to a content-driven, subscription-focused approach on the DTC platform has not only retained but also deepened customer relationships. This strategy has successfully increased our subscriber base without significant churn or reduced order frequency.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.