Q2 2024 Earnings Summary
- Laird Superfood has raised its full-year 2024 net sales guidance, now expecting 17% to 29% growth, due to strong performance and optimism about the remainder of the year, including anticipated boosts from back-to-school periods and seasonal products during holidays like Black Friday and Prime Day.
- Gross margins have improved to 42% in Q2 2024, exceeding the company's 40% target for the third consecutive quarter, with expectations to maintain or improve margins through total margin management programs, indicating effective cost control and potential for increased profitability.
- Significant growth opportunities exist through increased marketing efforts, leveraging the founders' influence (Laird and Gabby), expanding product placement, and tapping into new channels such as food service, colleges, universities, airlines, and hotels, which the company has not yet significantly explored.
- Low Product Placement and Brand Awareness: The company acknowledges having very low product placement across both natural and conventional channels, and even consumers familiar with the founders may not know they have a food brand, which could impede growth.
- Dependence on Future Expansion into New Channels: Significant growth is expected from entering new channels like food service, airlines, and hotels, but these initiatives are just beginning, creating uncertainty around execution and timing.
- Limited Future Margin Expansion Due to Commodity Inflation: Having already captured much of the low-hanging fruit in margin improvements, the company faces continued inflation in important commodities, which may limit further gross margin expansion beyond the current 40% target.
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Revenue Guidance Confidence
Q: What gives you confidence in raising the revenue guidance?
A: Management is confident due to expected seasonality in the second half, including the back-to-school period, which typically boosts retail sales as consumers return from vacations and resume healthier habits. Additionally, the startup of seasonal programs with successful SKUs and additional retail displays is anticipated to drive sales. Their Amazon channel is performing incredibly well, building new customer cohorts that are less expensive to market to and distribute products. The upcoming Black Friday period is also important for their direct-to-consumer and Amazon channels, as online shopping accelerates during that time. They are a "pretty conservative crew" by nature, so raising guidance is significant for them. Marketing spend was among the lowest in Q2, and they expect higher marketing pressure in the second half to drive sales. -
Gross Margin Outlook
Q: Have we reached a temporary ceiling on gross margin? Is there more margin expansion ahead?
A: Management believes there is still room for margin expansion. They've executed a margin management program with ideas to drive additional improvements. Supply chain strategies, such as fulfillment and co-manufacturing, have contributed to reaching over 40% gross margin. They've identified "quite a few levers" still to pull, despite some offsets from continued inflation in important commodities. As long as they can maintain over 40% gross margin, they are comfortable and will price accordingly if inflation rises significantly. They aim to stay in the low 40% range going forward. -
Long-Term Growth Levers
Q: What are the levers available for stepping up long-term revenue growth?
A: Management feels they are in the "very early innings" and are focusing on building awareness and product placement. Marketing is key; they are leveraging founders Laird and Gabby as brand ambassadors and influencers to share their health and nutrition-oriented products. They plan to expand product placement in natural and conventional channels, where they currently have very low placement. Additionally, they are setting up entry into the food service channel, targeting colleges and universities, business campuses, airlines, and hotels. They have reined in marketing spend to be cautious, focusing on strong ROI. New product innovation will also contribute to future growth, with more details to be shared over the next quarters.