Beyond Meat Inc. fell in late trading as the maker of plant-based meat substitutes reported narrowing margins amid unexpected costs related to Covid-19.
While sales surpassed the highest analyst estimate in the second quarter, that’s being entirely fueled by grocery sales. Restaurants, previously a high-growth channel, are also representing a much smaller percentage of sales as the pandemic keeps consumers at home.
The speed of the shift away from restaurants forced the company to repack products that were originally intended for the foodservice industry for retail sales — at a cost of $5.9 million. Chief Executive Ethan Brown said those repacking costs were the primary factor pulling down gross margins, which were 29.7% of net revenues, compared to 33.8% in the year prior.
Beyond Meat shares fell in late trading
“I don’t think there is going to be a fundamental shift in human behavior, ” Brown said in an interview. He expects restaurants to go back to normal when a vaccine for Covid-19 is developed, and in the meantime, the company is following growth — and that’s coming in grocery stores.
Beyond Meat shares fell as much as 9.5% in late trading. The stock had gained almost 90% this year through Tuesday’s close.
Net revenue increased 69% from a year earlier to $113.3 million for the period ended June 27, the El Segundo, California-based company said in a statement Tuesday. Analysts had anticipated sales of $99 million, according the average of estimates compiled by Bloomberg.
Sales to foodservice accounted for roughly half the plant-based meat seller’s business at the start of the year. Now, restaurants only make up about 12%.
Beyond Meat patty prices are about 20% higher than beef on a per-pound basis, the company said. Brown said the company is on track to reach pricing parity in about three and a half years.
The company said its outlook for the year remains suspended due to uncertainty related to the pandemic.