Boston Beer Co. has again booked an impairment charge related to Dogfish Head, the US brand it acquired three years ago.
A review of Boston Beer’s forecasts for Dogfish Head has led the Samuel Adams brewer to file an impairment on the brand.
The US group, reporting its third-quarter financial results, said it had recorded a $16.4m non-cash impairment charge “primarily for the Dogfish Head brand”.
The impairment was based on Boston Beer’s latest forecasts of Dogfish Head’s “brand performance” which, the company said, “has been below our projections” it made when it snapped up the business in 2020.
In the third quarter of 2022, Boston Beer also recorded an impairment charge of $27.1m for Dogfish Head.
The brand was a factor in the group’s lower depletions and shipments in the third quarter of 2023.
Depletions fell 6%, which Boston Beer said was due to decreases from its Truly, Angry Orchard, Samuel Adams and Dogfish Head brands.
Shipment volume stood at around 2.3m barrels, a 2.5% decline on the third quarter of 2022, again due to that clutch of four brands.
Net revenue inched up 0.9% to $601.6m.
“On a comparable weeks basis, which adjusts for the timing impact of the July 4th holiday, our depletions trends improved from a decrease of 7% in the second quarter to a decrease of 3% in the third quarter,” chairman and founder Jim Koch said. “Our highly cash-generative business and strong balance sheet allow us to invest in our brands as we work to return to long-term sustainable growth.”
Third-quarter operating income was $61.5m, versus $38.4m a year earlier. Boston Beer had booked higher impairment charges a year earlier, while its cost of goods sold was lower.
Net income reached $45.3m, against $27.3m in the corresponding period of 2022.
Boston Beer sees its full-year depletions falling by 5-7%, compared to its previous forecast of a drop of 2-8%. The company made the same change to its forecast for shipments.
The group sees gross margins coming in at 42-43%. It had forecast 41-43%. The company predicts its annual earnings per share will be between $6.04 and $8.04, versus its earlier forecast of $6 to $10.
“We are pleased with our performance in the third quarter as momentum on Twisted Tea remained strong and we continued to show progress on our margin enhancement plans while increasing brand investment,” president and CEO Dave Burwick said. “Based on our results year-to-date and our expectations for the fourth quarter, we are narrowing our revenue and EPS guidance ranges. We plan to continue to invest behind the Twisted Tea and Truly brands while also nurturing innovation across Beyond Beer categories to drive long-term growth.”
Analysts covering Boston Beer at US bank AllianceBernstein said the results provided investors with “something for the bulls and the bears”.
In a note to clients, they wrote: “The results were mixed. There was something for both the bulls – underlying margin improvement, adjusted EPS beat – and the bears: depletion guidance narrowed to bottom end [and the] impairment. Despite the green shoots, the story going forward for Boston Beer remains far from clean.”
