Boston Beer Company, with its Samuel Adams line, helped pioneer the craft beer category, and now it's warning that seeing a "general softening" for craft brews.
The company's shares fell more than 5 percent Thursday after it reported fourth-quarter results a day earlier and offered up a disappointing outlook for 2017.
During the quarter, sales of its Angry Orchard product line were weak, and cider trends so far this year are showing similar declines, the company said.
The full-year earnings forecast also reflected weakness in its flagship Samuel Adams line, including a new seasonal offering.
"Guidance for 2017 does not inspire confidence," Goldman Sachs analyst Judy Hong said in a research note Thursday. "Craft beer dynamics have not benefited SAM."
Craft beer has been a fast-growing segment in the U.S. market but Boston Beer has been struggling given the brand is not viewed as authentic craft by some consumers due to its size.
Management indicated on the earnings call late Wednesday that shipment/depletion trends "have remained weak" in the current year-to-date period.
"These trends are affected by the general softening of the craft beer category, and cider category, and a more challenging retail environment with a lot of new options for our drinkers," James Koch, the company's chairman and founder, said during the call.
Koch added the company was "particularly disappointed" with the performance of its new spring seasonal beer, Samuel Adams Hopscape.
"I don't really know how long the shakeout is going to take," he said. "It certainly will be more likely to be measured in quarters or years rather than months."
Susquehanna analyst Pablo Zuanic said in a note Thursday that the company's weak trends and outlook "is mostly self-inflicted," although he adds it comes amid "a more challenging period for craft beer in general."
Zuanic said one of strategic mistakes made by the company is "a fixation with its own 'craft mentality' when some of its brands (while premium) are already well-established and big enough to be managed differently."
Hong added, "Management's commentary around execution missteps on seasonals is concerning and we question whether increasing marketing investment is a prudent strategy in light of volume uncertainty and limited evidence of payback from prior investment."
Here's how Boston Beer did in the fourth-quarter period:
• EPS: $1.75 a share, versus $1.22 by Thomson Reuters analysts' consensus.
• Revenue: $219.4 million, versus $214.4 million expected by Thomson Reuters.
For the fourth quarter, Boston Beer's EPS beat Wall Street estimates and was up 45 percent from the prior year, while net revenue grew 2 percent. It said the earnings rise was primarily due to the increase in revenue and lower operating expenses that were only partially offset by decreased gross margin.
Depletions in the quarter were down by 1 percent, which the company said reflected decreases in Samuel Adams, Angry Orchard, Coney Island and Traveler brands. Boston Beer said that weakness was "only partially offset" by gains from Twisted Tea and the Truly Spiked & Sparkling brands.
Shares of Boston Beer closed about 5.4 percent lower at $157.90 a share, on more than double its average daily volume. The stock fell below $155 earlier in the session.