Beyond Meat posts profit miss, dragged by investment, marketing costs; shares fall

(Reuters) – Beyond Meat Inc (BYND.O) on Thursday missed quarterly earnings expectations due to higher costs, and said Executive Chairman Seth Goldman would give up his executive status, while remaining chair of the board, sending shares down 10% in after-hours trade.

FILE PHOTO: Vegetarian sausages from Beyond Meat Inc, the vegan burger maker, are shown for sale at a market in Encinitas, California, U.S., June 5, 2019. REUTERS/File Photo

The plant-based meat company said deals with retailers and restaurants substantially narrowed its loss and boosted sales. But Beyond Meat reported a 1 cent per share loss during the period, versus analyst expectations of a 1 cent profit, according to according to Refinitiv IBES data. Beyond Meat has never recorded a yearly profit due to spending on R&D, marketing and its fast-paced international expansion. In the most recent quarter, the company’s restructuring and some administrative costs were higher.

The El Segundo, California-based company – whose Beyond Burgers and Sausages are driving a global craze for plant-based meat products – struck several high-profile deals last year with fast-food chains including McDonald’s Corp (MCD.N) and Dunkin’ Brands Group Inc (DNKN.O). As consumers grow increasingly health-conscious and concerned about the environmental impact of industrial animal farming, the plant-based meat market is expected to expand to $140 billion.

The company’s share price has risen four-fold since its IPO in May, but short sellers and many investors view the stock as overvalued following its massive surge, now trading at 232.8 times expected earnings.

“There were very high expectations for BYND going into this earnings release,” CFRA Research analyst Arun Sundaram said. “However, we wouldn’t be surprised if the stock bounced back a bit tomorrow once the market opens.”

“Seth Goldman’s step down as executive chair is a bit shocking to us. You don’t typically see one of the early pioneers of the company shedding responsibilities during the very critical growth stage of company,” Sundaram said. Goldman joined Beyond Meat as executive chair and as a member of the company’s board in February 2013.

Beyond Meat’s products are sold by grocers including Walmart Inc (WMT.N) and Amazon.com Inc’s (AMZN.O) Whole Foods. Its deals with restaurants include Starbucks Corp’s SBUX.N recent announcement that it will soon sell a Beyond Meat breakfast sandwich across Canada.

But while Beyond Meat and its main rival Impossible Foods race to sign on major global restaurant chains, there have been some signs of issues including Canadian restaurant chain Tim Hortons dropping Beyond Meat’s products from its menu, saying they were not “embraced” by customers during a trial. Last month, Burger King began cutting the price of its Impossible Burgers, adding them to its value menu.

Initial feedback on the Beyond Burger has been largely positive, based on checks with some Ontario-based McDonald’s currently testing the plant-based burgers in Canada, Bernstein analyst Alexia Howard wrote last month in a note. Howard said, however, that it seemed the McDonald’s trial had not yet been a blowout success that justified an immediate nationwide rollout across both Canada and the United States.

Net revenue grew to $98.5 million from $31.5 million a year ago, beating estimates of about $80 million, in the period ended Dec. 31. Beyond Meat said it expects net revenue of $490 million to $510 million this year, an increase of 64%-71% from 2019, about in line with expectations. Beyond Meat’s net loss narrowed substantially to $0.5 million, or a loss of 1 cent per common share.

“We have a kind of cannibalistic approach to innovation where we’re trying to take out our existing products and there’s a lot of pride in doing that,” Chief Executive Ethan Brown said in an interview on Thursday.

Boosted by rising sales the company’s full-year loss has narrowed since 2017, even as it spends on a new facility in the Netherlands and is working to start production in Asia by the end of this year. In recent months, the coronavirus outbreak has slowed manufacturing in China. Beyond Meat said its goal remains to produce in the region by end of year, pending abatement of the coronavirus.

“We’re looking, like everyone else, at when things are going to clear … but it’s not something we’re wringing our hands about it here,” Brown said.

Reporting by Richa Naidu in Chicago; Additional reporting by Praveen Paramasivam in Bengaluru and Noel Randewich in San Francisco; Editing by Peter Henderson and Matthew Lewis

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