Shares of Green Mountain Coffee Roasters (NASDAQ: GMCR) tumbled nearly 40 percent in premarket trading Thursday and were heading for new lows for the year on a disappointing outlook.
It has already been a tough year for the company, which makes single-cup coffee machines and the coffee to go with them. Two months ago, shares tumbled 20 percent after Starbucks announced plans to sell its own single-cup brewing machine, despite assurances from CEO Howard Schultz that the machine was targeting a different audience.
Less than eight months ago, Green Mountain shares were trading for twice what they are now.
The Vermont company reported a larger profit for its second quarter Wednesday, but CEO Lawrence Blanford also projected “a more moderated growth trajectory” for its Keurig coffee brewer and single-serve K-Cup pack sales.Further out, Blanford said there is the potential for wider use of the company’s coffee makers in U.S. households, and it appears most analysts agree, but investors took flight on the near term risks.
For the fiscal year 2012 ending in September, Green Mountain now expects adjusted earnings per share will range from $2.40 to $2.50, and net sales between $3.8 billion and $4 billion. That’s short of analysts’ forecast for $2.65 earnings per share on $4.27 billion in revenue.
Green Mountain had previously predicted adjusted earnings per share would range from $2.55 to $2.65, and net sales growth between 60 percent and 65 percent. Based on the $2.65 billion in revenue it reported for fiscal 2011, that would have worked out to between $4.24 billion and $4.37 billion.
For the current quarter, Green Mountain expects adjusted net income per share between 48 and 53 cents, and net sales from $881 million to $897 million. Wall Street had projected adjusted third-quarter earnings of 71 cents a share on $1.05 billion in revenue.
Part of the problem the Company faces are the price increases that have been passed on to consumers during the last year. The Company reported that
inventories doubled in size from a year ago. In addition, GMCR took a write-down of the value of some of it’s finished and seasonal products, like cocoa, because sales in the quarter that ended on March 24 just weren’t as good as expected.
Heading into the close the stock is down nearly 50%.