(Corrects analyst name in paragraph 5 to ‘Laurent’ from ‘Lauren’ and to ‘his’ from ‘her’ in paragraph 6)
By Siddharth Cavale
March 8 (Reuters) - National Beverage Corp’s shares sank 20 percent on Friday after it reported dismal sales, as questions over ingredients used in its LaCroix sparkling water begin to crimp its popularity.
LaCroix has faced bad press and at least one lawsuit raising doubts over its claims that the drink is made with all-natural ingredients, but National Beverage says independent tests have proven that LaCroix uses only natural ingredients.
“We are truly sorry for these results,” CEO Nick Caporella said on Thursday in a unusual statement accompanying third-quarter results, which showed a 40 percent slide in profits. “Much of this was the result of injustice!”
A spokesman for the company said Caporella was referring to “unsubstantiated” allegations in the press about LaCroix.
Such negative headlines are also hurting sales of LaCroix, which contributes to just under half of National Beverage’s revenue, said Laurent Grandet, an analyst at Guggenheim.
In a report titled “Zero Calories, Zero Sweeteners, Zero Growth,” Grandet cut his rating on National Beverage’s stock to “sell” and lowered his 12-month target on the shares to $45 from $72. The stock was last down 21 percent at $54.09 in morning trading on the Nasdaq.
“As retail growth has remained persistently weak, the bigger issue now ... is the increased level of competition in the category that will make it very difficult for LaCroix to regain its lost share,” Grandet said.
LaCroix, which in recent years has stepped up advertising targeted at millennials in the face of declining sales of sugary sodas, is now losing some of its popularity to other sparkling waters including PepsiCo’s Bubly and San Pellegrino.
National Beverage reported third-quarter earnings of 53 cents per share, missing Wall Street forecasts of 76 cents.
Sales of $220.9 million also lagged the $237 million expected by analysts on average, according to IBES data from Refinitiv.
“Brands do not see or hear, so they are at the mercy of their owners or care providers who must preserve the dignity and special character that the brand exemplifies,” Caporella said in the statement. “Managing a brand is not so different from caring for someone who becomes handicapped.” (Reporting by Siddharth Cavale in Bengaluru; Editing by Sai Sachin Ravikumar)