Coffee Service

Farmer Brothers Q4 sales and earnings take a COVID-19 hit

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September 14, 2020

Farmer Brothers Co. sales took a 42.9% hit in the fourth quarter of fiscal 2020 compared to last year's fourth quarter, due to COVID-19. Sales for the quarter ending June 30 were $81.1 million, compared to $142 million for the prior year period, driven primarily by lower sales of coffee, beverage and allied products, as well as the sale of its office coffee business in July 2019, according to an earnings report.

Net loss was $9.7 million compared to net loss of $8.8 million in the prior year's fourth quarter. Net loss available to common stockholders was $9.9 million, or 57 cents per common share, compared to net loss available of $8.9 million, or 52 cents per common share, in the prior year period.

Shares were trading low as the company missed sales and earnings estimates for the quarter, according to Seeking Alpha analysts.

The company's stock price was $5.52 on Sept. 11, marking a downward trend since a $15.12 high on Dec. 14, 2019 for the last 52 weeks.

At the height of COVID-19 in April 2020, the company's direct store delivery sales declined 65% to 70% from the pre-COVID weekly average sales.

Management initiatives, the lifting of some government restrictions and reopening of some of customers' businesses improved throughout the quarter to approximately a 45% decline from pre-COVID-19 levels by June 30, 2020, according to the report. Sales remained level through the end of August 2020.

Coffee volumes in the quarter fell 7.7 million to 19.7 million pounds, a 28% decrease from the prior year period, primarily due to the impact of the COVID-19 pandemic.

The largest sales declines were from restaurants, hotels and casino channels, while demand from healthcare and c-stores channels were impacted less.

Gross profit in the fourth quarter of fiscal 2020 was $15.5 million, a decrease of $22.2 million, or 58.8%, from the prior year period and gross margin decreased to 19.2% from 26.6%.

Deverl Maserang, president and CEO, cited some positive factors during the earnings call.

Maserang said the company continues to build its West Coast distribution facility in Dallas Fort Worth.

"At our DSW facility, we fully operationalized the new retail packaging line during the fourth quarter, and we will soon have another three lines up and running, providing an additional 13 million pounds of packaging capability," he said. "We've also begun the installation of an additional roaster to further enhance our DSW roasting capability.

"While the pandemic has undoubtedly created challenges in our business, we've also actively taken advantage of opportunities during this time to strengthen our manufacturing capacity," he said. "And these actions will in turn, strengthen Farmer Brothers' competitive position for the long term."

Since a headcount reduction and furlough program at the height of the stay at home orders across the U.S., the company has brought back approximately 125 team members or 20% of those that were originally furloughed, Maserang said.

For an update on how the coronavirus pandemic is affecting the convenience services industry, click here.