Slow 20 Brewer Sales Deal Keurig A Blow In Second Quarter

WATERBURY, VT -- Keurig Green Mountain blamed slower-than-expected sales of its 2.0 brewer for disappointing second-quarter financial results and cut its estimates for the year.

For the second-quarter, ended March 28, Keurig's profit dropped 4% to $155.5 million, or 97¢ per share from $162.1, or $1.03 a share, during the same period last year. Its revenue grew 2% to $1.13 billion from $1.1 billion a year earlier.

Total net sales of portion packs for Keurig's brewers increased 7% in the quarter, while brewers and accessories net sales declined 23%. Other product net sales declined 5%, compared with the prior year period.

Keurig president and chief executive Brian Kelley said the company's top-line growth fell below its expectations primarily due to a slower-than-expected transition to the Keurig 2.0 system.

"We are taking actions to reduce brewer inventories, enhance our 2.0 brewer packaging to better communicate our extensive brand variety and step up innovation on our owned brands," Kelley said. "Although we are lowering our guidance to reflect the impact of near-term challenges related to this complex product transition, we remain highly confident in our long term strategy for the Keurig hot system and continue to believe there is a significant runway of opportunity. Combined with the upcoming launch of our Keurig Kold system, we expect the Keurig brand to further expand and globalize, while continuing to transform the premium home beverage experience for consumers."

Keurig had forecast sales growth in the mid- to high-single digits, but now says its annual revenue may increase by a low single-digit percentage and may even be unchanged from fiscal 2014, when it had $4.71 billion in revenue. The company also said its adjusted per-share profit will decrease, compared with last year.

Separately, Keurig said former Mead Johnson Nutrition Co. executive Peter Leemputte will be its new chief financial officer, beginning Aug. 17. The company announced in November that Frances Rathke would step down from the CFO post in fiscal 2015.