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Headlines
- Celsius Holdings reported a significant decline in orders from PepsiCo, leading to a sharp drop in its stock price.
- The decrease in orders is due to PepsiCo adjusting its inventory after over-ordering in the previous year.
- Despite this setback, Celsius Holdings has seen a 10% increase in product sales and gained market share in the energy drink sector.
Celsius Holdings (NYSE:CELH) experienced a sudden decline in its stock value today, following an appearance by its management at Barclays' 17th Annual Global Consumer Staples Conference. During the session, it was revealed that sales to PepsiCo (PEP) in the current quarter are expected to be down by $100 million to $120 million compared to last year. This news caused concern among investors, leading to a significant drop in Celsius' stock price, down 12% by mid-afternoon.
PepsiCo (NASDAQ:PEP) became Celsius' primary distribution partner in August 2022. Under this partnership, Celsius records revenue when it delivers inventory to PepsiCo, which then distributes the products to retail channels for consumer purchase. This process creates a lag between when Celsius generates revenue and when its products are actually sold in stores. In 2023, Celsius saw an impressive 102% increase in revenue year over year, exceeding many expectations. However, it is now apparent that this growth was partly due to PepsiCo over-ordering, a situation that PepsiCo is correcting by reducing its orders from Celsius to clear out existing inventory.
For the current third quarter of 2024, Celsius management has indicated that PepsiCo will order significantly less than it did in the same quarter of 2023. While this reduction is expected to impact Celsius' Q3 financial results, it's important to note that the overall demand for Celsius products remains strong. In fact, the company reported a 10% increase in consumer sales so far this quarter. Additionally, Celsius has gained further market share in the energy drink sector, a positive indicator of its long-term growth potential.
Although today's news triggered a sharp reaction, the underlying business metrics suggest that Celsius is still on a growth trajectory. The market may be reacting prematurely, and the company's continued market share gains reflect its strength in a competitive industry.