Goodfood shares rose 39% in Toronto on Friday after the Montreal-based company revealed that it had improved margins despite a drop in the number of active customers of its products.
The number of active customers fell to 157,000 at the end of fiscal 2022, from 211,000 three months earlier and 249,000 a year ago.
This situation worries analyst Frédéric Tremblay at Desjardins Securities. He expected a number of 193,000. It will be important to quickly stabilize weekly subscriptions to deliveries of packed lunches and complementary products and even to increase them, according to him.
“It’s a major challenge to take up given the changes observed in consumer behavior in the current inflationary context”, comments this expert in a note sent to his clients. “Additional marketing investments may be required,” he adds.
Decline in net sales
Net sales of 50 million generated during the summer months are in line with analysts’ expectations. They are nevertheless down 37% over one year. The continued removal of containment restrictions, increased vaccination coverage and economic conditions may in particular explain the pressure on sales.
Gross margin increased to 28.3% in the fourth quarter, an improvement of 5% compared to the corresponding period a year ago.
The net loss for the quarter, however, more than doubled over one year to 58 million. Management explains it mainly by non-recurring charges related to reorganization initiatives.
Adjusted operating loss for the year-end quarter fell to $2 million. Analysts had expected an adjusted operating loss of 3.4 million.
By the very admission of the big boss, Goodfood has had its share of challenges in 2022.
PHOTO MARCO CAMPANOZZI, PRESS ARCHIVES
Goodfood co-founder and CEO Jonathan Ferrari
Whether it’s consumers moving away from e-commerce, behavior that we believe is temporary, or difficult conditions in capital markets due to macroeconomic forces not seen in 40 years, we face headwinds that made Goodfood’s 2022 fiscal year its toughest since its inception in 2014.
Jonathan Ferrari, co-founder and CEO of Goodfood
In mid-October, Goodfood announced it was discontinuing its on-demand grocery delivery service and optimizing its network of manufacturing facilities by consolidating multiple facilities across the country. Goodfood’s tightening geographic presence led to a reduction in the workforce and the consolidation of production into two facilities, in Montreal and Calgary.
The company has also reduced its capital expenditure, increased the price of ready-to-cook meals and complementary products, in addition to reducing its sources of supply of ingredients which have been reduced from 400 to less than 200.
Management cautions that there continues to be significant uncertainty regarding the company’s ability to continue as a going concern.
To reduce the risk of the company running out of cash, executives are trying to maximize efficiencies with reorganization initiatives, working with lenders to put in place a revised credit facility, and considering other funding.
Management still aims to generate adjusted operating profit by the end of February and even thinks it can generate positive cash flow by that date.
Net sales between 46 and 48 million for the quarter at the beginning of the fiscal year (months of September, October and November) are forecast by management, as well as a gross margin between 32% and 34%. The analyst consensus was for sales of 56.2 million and margins of 27.8% for the first quarter of 2023, the results of which will be presented next month.
After hitting a high of $13 in January last year, Goodfood’s stock slipped below $1 on the Toronto Stock Exchange. The stock ended the week at 50 cents.