Keurig Green Mountain Inc. plummeted the most in three years after cutting sales and profit forecasts, hurt by sluggish demand for its K-Cups and the slow rollout of a new cold-drink machine.
The maker of single-serve brewers now expects sales to suffer a percentage decline in the low- to mid-single digits this year, according to a statement on Wednesday. Keurig had previously predicted that sales would be flat or up. Profit will drop in the “low teens,” partly because of currency headwinds. The company had forecast a decrease in the mid-single digits.
The tumble wiped out more than $3 billion from Keurig’s market value, the latest setback for a business struggling to beat back private-label competition. Customers also have been slow to adopt Keurig’s 2.0 brewer, hurting sales of its K-Cup pods. A new cold-drink machine, which could compete with devices from SodaStream International Ltd., is rolling out later than investors had hoped. That’s left the one-time high flyer in a tough spot.
“Brewer weakness indicates adoption of 2.0 is underwhelming,” Mark Astrachan, a Stifel Financial Corp. analyst, said in a note. “Weaker brewer growth hurts K-Cup sales, the company’s profit driver.”
The shares tumbled 30 percent to $52.67 on Thursday in New York, the biggest drop since May 2012. Keurig has slumped 60 percent this year, while the Standard & Poor’s 500 Index gained 1.2 percent.
In the fiscal third quarter, which ended June 27, Keurig’s pod sales fell 1.4 percent to $815 million. Brewer and accessories sales also were down, dropping 26 percent.
“We are taking decisive actions to adapt and compete more effectively in today’s rapidly-evolving, dynamic marketplace,” Chief Executive Officer Brian Kelley said in the statement.
In May, Kelley said the Kold system won’t be widely available until 2016, a slower schedule than investors had expected. Though the machine will be sold online and in certain stores starting this fall, it won’t spread to the full retail channel until the following year’s holiday season.
Coca-Cola Co. is backing Keurig’s new machine with an investment. And the beverage giant’s CEO, Muhtar Kent, has been talking up the Kold, which will be able to make soda, sports drinks and seltzer. But SodaStream has dismissed the looming competition, saying there’s little demand for Coke-style products at home. That company is now focused more on offering carbonated water.
Keurig’s profit was 80 cents a share, excluding certain items, last quarter. Analysts estimated 79 cents, the average of projections compiled by Bloomberg.
Keurig also approved a new stock buyback authorization of an additional $1 billion.