Boston Beer Co. has cut its forecast for its annual earnings after changing an existing deal with supplier Rauch.
The Sam Adams brewer is predicting its earnings per share will come in between $3.80 and $5.80 in 2024, down from an earlier forecast of $5.50 to $7.50.
It retained its previous forecasts for annual depletions (down at a low-single-digit rate year-on-year) and gross margin (44-45%).
In a statement issued on Friday afternoon ET (20 December), Boston Beer said a production contract it has with Rauch North America had been restated “in its entirety”.
The company said the new deal is a “better match” for its “future capacity requirements” and would lead to “increased production flexibility”.
Nevertheless, as a result, Boston Beer is to pay $26m to Rauch in exchange.
“The company has regular discussions with its third-party production suppliers related to its future capacity needs and the terms of its contracts,” Boston Beer said. “Changes to volume estimates, future amendments or cancellations of existing contracts could accelerate or change total shortfall fees expected to be incurred.”
Boston Beer lowered its forecast for annual depletions in October alongside its third-quarter results, which included a 3% decline on that metric. Third-quarter shipments were also down, dropping 1.9%, with both sales numbers affected by the company’s Twisted Tea brand.
Nine-month depletions fell 3%. Shipment volume was 2.9% lower. As a result, net revenue dipped 0.3% to $1.61bn.
Nevertheless, operating income in the 39 weeks to 28 September stood at $132m, up from $125.9m in the corresponding period the year before. Net income was $98.5m, against $94.4m the year previous.
The third-quarter results filing also included another impairment on the Dogfish Head brand Boston Beer acquired in 2020.
The move followed a review of the “latest forecasts of brand performance” in September, which was “below our projections made on the acquisition date”, the company said at the time.
The group had already booked two separate impairment charges related to the Dogfish Head beers in the third quarters of 2023 and 2022.
