Green Mountain’s ‘Hyper’ Growth Is Over: Greenberg
The heady hyper-growth days of Green Mountain Coffee Roasters are officially over.
CEO Larry Blanford conceded as much in the company’s earnings releaseWednesday when he said:
“As we become larger, however, our sales growth trajectory will understandably moderate from hyper-growth to a level more in-line with other successful growth businesses. ... Based upon our current analysis of business fundamentals and the single-serve opportunity, we believe we will deliver annual sales growth in the range of 15 percent to 20 percent with annual earnings growth in the mid-teens over the longer term.”
That pretty much sums up the Green Mountain story, in a quarter that included lower than expected revenue and earnings growth — and guidance for the fourth quarter and year that are below expectations. As expected, margins also tumbled in the face of increased competition. (Click here for the latest after-hours quote.)
Going forward: While 15 percent to 20 percent annual growth might sound impressive, consider that last year the company grew by 95.4 percent; the year before that, 72 percent with earnings growth of 151 percent, 46 percent and 151 percent, respectively.
On top of that, inventory ballooned by 60 percent. Green Mountain blames the higher inventory on increases in finished Keurig brewers in preparation for the holidays.
But the company, which has been facing increased competition for its K-Cups as its patents come off patent, also noted a decline in its gross margin to 34.9 percent from 36.8 percent, “due in part to under-utilization” of its manufacturing base as a result of lower-than-expected manufacturing through-put, primarily due to lower K-Cup pack demand and lower-than-planned production levels.”
Which is what happens to one-product companies that rapidly mature after product saturation. If the stock had been a highflier, like Green Mountain, it probably wouldn’t have been a pretty outcome.
Green Mountain’s shares, which peaked last September at around $109, are now trading at multi-year lows.
—By CNBC's Herb Greenberg
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