Oatly is pushing to simplify and streamline its operations after a disappointing quarterly earnings report saw the Swedish oat product maker slash its 2023 revenue forecast range from 23% to 28% to a dire 7% to 12%. Still, CEO Jean-Christophe Flatin said the company continues to make “progress towards our goal of achieving profitable growth in 2024.”
“As expected, we continued our sequential improvement of gross margin and increased our advertising investments to continue to fuel growth,” Flatin said, adding that he still expects the company to achieve its target Q4 gross margin percentage in the high 20s and hit positive adjusted EBITDA in 2024.
Overall, revenue increased 10.1% year-over-year to $196 million; on a constant currency basis, revenue was up 11.1%. Gross margin increased 340 basis points in the quarter (+19.2%), with volume rising 3%.
Oatly’s sagging business in Asia was a particular focus during the quarter; last year’s optimistic outlook was driven in part by predictions of a “large post-pandemic tailwind” in the region that “has not materialized,” admitted COO Daniel Ordoñez. However, revenue during Q2 dropped 14.9% ($6.5 million) to $37.2 million. In response, the company announced actions around “simplification of the portfolio of products and reduced operating costs.”
In the post-pandemic era, Flatin said, consumers have ”behaved differently than we had originally expected, and we need to adjust.”
Elsewhere, Oatly performed better. With supply issues seemingly addressed, revenue in the Americas was up 19.4% ($10.1 million) to $61.8 million in Q2, driven primarily by price increases across all customers and channels. Around 51.2% of Americas revenue was from retail, compared to 55.3% in the same period last year. EBITDA improved $8.1 million to a loss of $12.6 million, down from a loss of $20.7 million.
The oat milk brand is targeting around $85 million in cost savings in 2024, with fewer project-related expenses, less spending on outside consulting and the elimination of certain jobs. Marketing will not be part of those cuts, however. Back in March, Ordonez noted that, with U.S. supply chain snags under control, “The reality is now we can unleash the power of the brand.”
Shares of Oatly Group (OTLY) were down 30% at mid-afternoon today.