Reed’s ((REED)) has held its Q2 earnings call. Read on for the main highlights of the call.
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Reed’s Earnings Call Reveals Mixed Sentiment Amid Strategic Moves
Reed’s recent earnings call presented a mixed sentiment, reflecting both strategic advancements and ongoing financial challenges. The company has made notable efforts to address its issues, such as strategic appointments and product line expansions, but the significant decrease in net sales and gross profit remains a concern.
Appointment of Vice President of On-Premise Sales
In a strategic move, Reed’s appointed Rachel Fox-Greenwood as Vice President of On-Premise Sales in July. Her role is pivotal in leading the company’s expansion into food service and convenience channels. With her extensive experience in market expansion and strategic partnerships, Fox-Greenwood is expected to drive significant growth for Reed’s.
Functional Soda Line Expansion
Reed’s functional soda line has shown promising growth, gaining over 9,000 points of distribution since its launch in April. The line has achieved national distribution in Sprouts and placements in major retailers like Kroger and Giant Carlisle. The Root Beer and Berry Bubbly SKUs are particularly gaining traction, indicating a positive consumer response.
Key Milestone at Costco
A significant achievement for Reed’s is securing approval for the Winter Ginger Ale Variety Pack at Costco. This milestone is expected to contribute to the company’s revenue, with anticipated product sales reaching the 7-figure range in the second half of 2025.
Decrease in Net Sales
Reed’s reported a decrease in net sales for Q2 2025, dropping to $9.5 million from $11.9 million in the previous year. This decline is primarily attributed to lower volumes with recurring national customers, highlighting a key area of concern for the company.
Decline in Gross Profit and Margin
The company’s gross profit fell to $0.8 million from $3.8 million, with a gross margin decline to 8% from 32%. This significant drop is largely due to $1.6 million in inventory write-offs, underscoring the financial challenges Reed’s is facing.
Increased Operating Expenses
Operating expenses rose to $6.6 million from $4.5 million, driven by contract proceeding costs and investments in personnel and marketing. This increase reflects Reed’s commitment to strategic investments, despite the financial strain.
Significant Net Loss
Reed’s reported a net loss of $6.0 million or negative $0.13 per share, compared to $3.2 million or negative $0.77 per share in Q2 2024. This significant net loss highlights the financial hurdles the company needs to overcome.
Higher Delivery and Handling Costs
Delivery and handling costs increased to 17% of net sales, up from 12% in the previous year. This rise is due to efforts to rebalance inventory across regions, reflecting the company’s operational challenges.
Forward-Looking Guidance
Reed’s guidance for the future focuses on key operational improvements and strategic initiatives aimed at boosting long-term growth and profitability. Despite a decline in net sales, the company is investing in streamlining operations, refining marketing strategies, and expanding into underpenetrated channels. Reed’s is also working on enhancing supply chain efficiency and improving inventory management, with a shift from glass to cans for cost savings. The company aims to restore lost placements and drive sales growth within its core product lines through ongoing product innovation and strategic personnel appointments.
In summary, Reed’s earnings call highlighted a mixed sentiment, with strategic moves and product expansions offering a positive outlook amidst financial challenges. The company’s efforts to address operational issues and invest in growth initiatives are commendable, but the significant decrease in net sales and gross profit remains a critical concern. Reed’s forward-looking guidance indicates a focus on long-term growth and profitability, with strategic initiatives aimed at overcoming current hurdles.