Monster Energy reported over $1 billion in sales during the first quarter of 2020, though the company is preparing for more difficult days ahead.
Net sales rose 12.3% ($1.06 billion) over the same period last year, with gross sales up 13.4%.
Operating profit grew 13% during the quarter. Geographically, U.S. sales were up 6.6% and international sales rose 25.6%, both surpassing analysts’ projections.
The company will be encouraged by a 14% increase ($992.5 million) in sales for its Drinks segment, which includes the core Monster line as well as Reign Total Body Fuel. The Strategic Brands segment, consisting of a portfolio of brands acquired in Monster’s 2015 distribution agreement with The Coca-Cola Company, fell 8.2% to $64.5 million.
During the call, Monster CEO Rodney Sacks revealed his own personal battle with the coronavirus, having tested positive for COVID-19 in mid-March and subsequently recovered. Framing the crisis from the company’s perspective, Sacks said the pandemic did not have a material impact on net and gross sales for the first quarter as a whole, though it did adversely affect April sales.
He reiterated that Monster “does not foresee a material impact” on operations for its co-packers, bottlers or distributors, nor has it encountered issues in its raw material or finished product supply chains.
The numbers reveal the breadth and depth of the coronavirus pandemic’s impact on the U.S. retail landscape. According to Nielsen reports shared by the company for the 13 weeks through April 25, 2020, MULO sales for the energy drink category, including shots, fell 1.2% compared to the same period a year ago. Sales of the company’s energy brands, including Reign, were down 0.2% in the 13 week period. Sales of Monster (6.8%), NOS (8.4%) and Full Throttle (12%) all declined.
Convenience stores, one of energy’s strongest channels and roughly 70% of Monster’s U.S. business, suffered particularly hard during the last three months, as shelter-in-place orders saw foot traffic decline significantly. According to Nielsen, for the full week ended April 25, energy drink sales, including energy shots, at c-stores and gas stations decreased 15.9% over the same period the year prior.
Within the channel, sales of the Monster’s energy brands, which include Reign, declined 14.4% in the four-week period. Sales of Monster Energy fell 16.9%, while NOS was down 16.2% and Full Throttle dropped 15.9%. For the four weeks ended April 25, sales of Monster’s coffee-based energy drinks fell 12.7% in convenience (compared to 13.3% decline for the category), with sales for Java Monster down 8.7% in the channel.
The numbers also reflect changing consumer channel preferences and package configurations, with Sacks reporting that the company’s direct business (club, e-commerce) has been relatively stable.
The company has also taken steps to steel shareholders from the economic fallout of the ongoing global COVID-19 pandemic: during the the first quarter, the company purchased approximately 10.5 million shares of its common stock at an average purchase price of $55.22 per share, for a total amount of $579.3 million. Around $441 million remains available for repurchase, as of yesterday.
Writing for Goldman Sachs, equity research analyst Bonnie Herzog said she was cautiously optimistic that Monster can weather the storm.
“MNST is still out-executing its peers and is staking share in this environment – and we believe it should emerge in a strong position as the Energy Drink category recovers,” Herzog wrote, adding that the company is still rated as “buy.”
Kaumil Gajrawala of Credit Suisse also noted that Monster has both healthy liquidity — no debt and around $1 billion in cash on hand — and the prior experience of effectively navigating the economic downturn from 2007-2010, during which it invested in opening new territories. Despite the drop in foot traffic at c-stores, Gajrawala said Monster’s “c-store skew and demographics suggest Monster among the first to improve in our coverage as economies turn on.”
Bank of America analysts were also encouraged by Monster’s long-term prospects thanks to its “high quality balance sheets and ability to return cash to shareholders,” while noting that, despite potential disruption caused by PepsiCo’s recent distribution pact with Bang Energy, it will serve to “bring the Coke system closer together against a common opponent.”