Dive Brief:
- Keurig continues to struggle with declining sales, as its fiscal fourth quarter revenue slid 13% to $1.04 billion. Single-serve coffee pods, which generate the bulk of sales, saw revenue decline by 9%, and brewers and accessories by 32%.
- Net profit tumbled by 33%, attributed in part to restructuring costs and other one-time items.
- Despite these declines, Keurig's stock soared more than 20% thanks to the results, projected profit, and news that the company would raise its dividend 13% to $1.30 as of Feb. 16.
Dive Insight:
This level of stock activity was a break from what Keurig had experienced the rest of this year. "The stock had lost nearly three quarters of its value from its peak late last year through Wednesday’s close, before its quarterly results were announced," The Wall Street Journal reported. After last quarter's earnings alone, Keurig's stock dropped 29% in after-hours trading.
Consistent with earlier reports, however, are declines in sales and profit, which led to the announcement in August that Keurig would cut 5% of its workforce, or about 330 jobs, as well as a cost-cutting program that is intended to save the company $300 million over three years.
Keurig is hoping to turn things around with its latest machine, the Keurig Kold, especially as the holiday buying season nears. So far analysts have criticized the device's high price tag, but Keurig has supplemented options for consumers by also relaunching lower-priced brewers, expanding its portfolio of brands, and offering "a refillable K-Cup coffee pod that lets people to use their own ground coffee in its brewers," according to The Wall Street Journal.
"What's more, because of knockoff competition and flagging sales, Keurig has lost possibly its most powerful asset of all: The pricing leverage it had on licensing deals with coffee roasters and retail and restaurant chains. Stifel estimates this has already led to price cuts of up to 38 percent on its brewers and up to 21 percent on its K-cups," Bloomberg Gadfly reported.