Results below expectations | Extensive advertising offensive for Guru

(Montreal) Guru is preparing to “full throttle” its advertising budget this summer to build its brand and test the most effective advertising strategies, says the energy drink maker, which reported quarterly results that fell short of analysts’ expectations .

Posted at 10:43am
Updated at 4:56 p.m

Stephane Rolland
The Canadian Press

The next quarter will be “extraordinary” in terms of the company’s advertising offensives, President and CEO Carl Goyette warned Tuesday during a conference call with financial analysts. “We really want to step on the gas in the summer. »

During the summer season, the company wants to test different advertising strategies. “We will not limit ourselves and test several strategies. This fall we will analyze all of this to understand what works best, to see where we should redouble our efforts and where we should do less. »

In addition to a cross-platform campaign, Guru plans to sponsor about thirty events across 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 selling Guru’s products in Canada since early October. The agreement gives the Montreal company the opportunity to promote its brand in new markets and with new banners.

The strategy follows a moderation of the advertising offensive during the curfew in winter 2022. .

As the company hinted at in March, Guru raised prices by 6% to 10% in mid-May to account for inflation. Customers have responded well to the increase, says CFO Ingy Sarraf. “So far it’s been well received. It was online with companies in our industry. »

Mme Sarraf believes the price increase will offset the impact of cost inflation on profitability. In the second quarter, the company reported gross margin of 54%, down 8.42 percentage points year-over-year.

Margins were relatively flat compared to the previous quarter’s 55%. “This is good news considering 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, second-quarter sales fell short of analysts’ expectations.

In the three months ended April 30, the Montreal-based company reported revenue growth of 7.5% to $7.6 million, the company announced Tuesday. Because Guru is viewed as a growth stock that prioritizes long-term market growth over immediate profitability, analysts tend to place more emphasis on revenue growth than near-term earnings.

The company reports that sales volume increased by 26%. Mr. Landry notes in a note that prices are down 14% to 18% as a result of the distribution deal with PepsiCo.

The company posted a net loss of 4 million, or 12 cents a share, compared to a loss of 1.2 million, or 4 cents a share.

Before the results were released, analysts had expected revenue of 8.3 million and a loss per share of 16 cents, according to Refinitiv.

For his part, Stifel’s GMP analyst points out that sales in the United States are up 92%. “It proves that the brand is also successful outside of Canada. This is a positive sign that demonstrates the company’s ability to replicate its success outside of Quebec. »

As of Tuesday’s close on the Toronto Stock Exchange, Guru’s stock was down 49 cents, or 4.8%, to $9.65.

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