Laird Superfood Inc. reported financial results for its second quarter ending June 30, 2022.
Second-quarter 2022 highlights
- Net sales of $8.7 million were down 6% versus the prior year period.
- Online contributed 60% of total net sales and revenue decreased 11% year-over-year, driven by reduced working marketing spend and elimination of free shipping on orders under $40.
- Wholesale net sales contributed 39% of total net sales and revenue increased 4% year-over-year, driven by continued expansion in Grocery and growth in Club business.
- Gross profit was $1.6 million and gross margin was 18.2% compared to gross profit of $2.2 million and gross margin of 23.8% in the prior year period.
- Net loss was $4.9 million, or $0.54 per diluted share, compared to a net loss of $6.3 million, or $0.70 per diluted share, in the prior year period.
- Adjusted net loss, which is a non-GAAP financial measure, was $6.3 million, or $0.69 per diluted share, compared to adjusted net loss of $6.3 million, or $0.70 per diluted share, in the prior year period.
- Net cash used in operating activities was $3.9 million, an improvement of 33% compared to $5.8 million of net cash used in operating activities in the prior year period.
“We are encouraged by early progress on key initiatives to drive growth in Wholesale as well as optimizing our cost structure,” Jason Vieth, president and chief executive officer, stated in the announcement. “As expected, second quarter results were adversely impacted by structural headwinds in online channels as well as heightened inflationary pressures. Despite these challenges and lower net sales, we delivered a 33% improvement in operating cash flow for the quarter and our balance sheet remained strong with nearly $25 million of cash and no debt. Underlying consumer metrics also continue to trend favorably, reflecting the strength of the Laird Superfood brand and demand for our core products.
“Our new leadership team is energized and doing a phenomenal job of reorienting the Company to the biggest commercial and operational opportunities, while executing well against our strategic priorities. We are taking key steps to grow and improve our business, including:
- Realigning new sales broker partners across all classes of the retail trade, while at the same time increasing prices where appropriate and implementing a $40 threshold for free shipping in the DTC channel.
- Rebuilding our marketing agency ecosystem and associated creative content across social media, Amazon, public relations, and email.
- Streamlining our operations through targeted process improvement and organizational efficiencies to match our supply capability to our anticipated demand.
“Overall, we are continuing to make solid progress against our strategic plan, and we remain confident in our direction and ability to drive significant improvements to sales growth and profitability in the future.”
Net sales decreased 6% to $8.7 million in the second quarter of 2022 compared to $9.2 million in the second quarter of 2021, driven by elevated promotional discounts while volume was nearly flat. Wholesale channel increased 4%, driven by distribution gains in Grocery and Club, while online sales declined 11%. The decline in online sales was primarily due to challenging results in direct-to-consumer channel impacted by a consumer spending pull back due to inflationary concerns, elevated discounts and reduced working marketing spend as the company optimizes investment mix across all digital channels. Despite these factors, Amazon.com channel sales grew, reflecting momentum driven by changes the company is making.
Gross profit was $1.6 million, a 28% decrease compared to the prior year period of $2.2 million. Gross margin was 18.2% of net sales in the second quarter of 2022, compared to 23.8% of net sales in the prior year period. The margin compression was driven by a combination of elevated promotional discounts, inflation in raw materials, packaging, and shipping costs combined with fixed cost deleverage of internal manufacturing facilities partially offset by gains in labor efficiencies and organizational optimization.
Loss from operations was $4.9 million in the second quarter of 2022, compared to a loss of $6.3 million in the prior year period, a 22% improvement versus a year ago.
Net loss was $4.9 million, or $0.54 per diluted share, in the second quarter of 2022, compared to a net loss of $6.3 million, or $0.70 per diluted share, in the prior year period.
Adjusted net loss, which excludes the impact of certain one-time items, was $6.3 million, or $0.69 per diluted share, in the second quarter of 2022 compared to $6.3 million, or $0.70 per diluted share, a year earlier.
For the six months ending June 30, 2022
Net sales increased 9% to $18.0 million in the first six months of 2022 compared to $16.6 million in the first six months of 2021. The increase in year-to-date net sales was due to online growth, reflecting the acquisition of Picky Bars, as well higher wholesale revenue driven by distribution gains.
Gross profit was $3.5 million, a decrease of 12% compared to the prior year period of $4.0 million. Gross margin was 19.6% of net sales in the first six months of 2022, compared to 24.2% of net sales in the prior year period. The year over year compression in gross margin was primarily due to elevated promotional activity, inflationary pressures on raw materials, packaging, and freight, partially offset by labor efficiencies and organizational optimization.
Loss from operations was $18.9 million in the first six months of 2022, compared to a loss of $11.6 million in the prior year period.
Net loss was $19.0 million, or $2.09 per diluted share, in the first six months of 2022, compared to net loss of $11.6 million, or $1.30 per diluted share.
Adjusted net loss, which excludes the impact of certain one-time items, was $13.0 million, or $1.42 per diluted share, in the first six months of 2022 compared to $11.6 million, or $1.30 per diluted share in the prior year period.
2022 outlook
“We are operating in an unusually uncertain economic environment with the highest inflation rates in decades, particularly in food and fuel, which has created more pressure on margin mix and operating costs than we had anticipated in the beginning of the year. We expect these trends to continue in the second half of the year and are accordingly updating our guidance for the full year 2022. We estimate that net sales for full year 2022 will be in a range of $36 million to $38 million and gross margin for full year 2022 is estimated at approximately 20%, which is inclusive of thirteen points of Outbound Distribution expense included in our Cost of Goods Sold. The company’s guidance assumes that there are no significant disruptions to the supply chain, or its customers or consumers, including any disruptions from adverse macroeconomic factors or additional adverse changes related to the duration, magnitude and effects of the COVID-19 pandemic.”
