(Montreal) Guru is preparing to go “full throttle” with its advertising budget over the summer to build its brand and test the most effective advertising strategies, says the energy drink maker, which unveiled quarterly results below analysts’ expectations.
Updated yesterday at 4:56 p.m.
The next quarter will be “out of the ordinary” in terms of the company’s advertising offensives, President and CEO Carl Goyette warned during a conference call with financial analysts on Tuesday. “We want to give a big blow during the summer. »
The company intends to test different advertising strategies during the summer season. “We are not going to limit ourselves and we are going to test several strategies. This fall, we will analyze all of this to understand what works best to see where to double our efforts and where to do less. »
In addition to a multiplatform campaign, Guru plans to sponsor some thirty events in Canada between May and September. The company will also sponsor the television series Amazing Raceone of the most popular summer shows in English Canada.
The advertising offensive comes as PepsiCo has been distributing Guru’s products in Canada since the beginning of October. The agreement gives the Montreal company the opportunity to promote its brand in new markets and new banners.
The strategy follows a moderation of the advertising offensive during the winter 2022 confinement. .
As the company hinted in March, Guru raised prices by 6% to 10% in mid-May to account for inflation. Customers have responded well to the increase, says chief financial officer Ingy Sarraf. “So far it has been well received. It was online with companies in our industry. »
Mme Sarraf expects the price increase to offset the effects of cost inflation on profitability. In the second quarter, the company announced a gross margin of 54%, a decrease of 8.42 percentage points compared to last year.
Margins remained relatively stable compared to the 55% recorded in the previous quarter. “This is good news when you take into account the current economic environment,” said Stifel GMP analyst Martin Landry.
Income below expectations
Despite strong growth in the number of energy drinks sold by Guru, its second-quarter revenue fell short of analysts’ expectations.
In the three months ended April 30, the Montreal-based company saw revenue grow 7.5% to $7.6 million, the company announced Tuesday. Because Guru is viewed as a growth stock, which prioritizes long-term market growth over immediate profitability, analysts tend to place greater emphasis on revenue growth than short-term earnings.
The company reports that sales volume increased by 26%. Mr. Landry points out, in a note, that prices have fallen by between 14% and 18% because of the distribution agreement with PepsiCo.
The company recorded a net loss of 4 million, or 12 cents per share, compared to a loss of 1.2 million, or 4 cents per share.
Prior to the earnings release, analysts had expected revenue of 8.3 million and a loss per share of 16 cents, according to Refinitiv.
For his part, the Stifel GMP analyst points out that sales in the United States are up 92%. “It proves that the brand is doing well outside of Canada. This is a positive sign that demonstrates the company’s ability to replicate its success outside Quebec. »
At the close of the Toronto Stock Exchange, Guru’s stock fell 49 cents, or 4.8%, to $9.65 on Tuesday.
