Keurig Green Mountain Reports Fiscal Second Quarter 2015 Results, Net Sales Up 2%

WATERBURY, Vt.--(BUSINESS WIRE)-- Keurig Green Mountain, Inc. (NASDAQ: GMCR), a leader in specialty coffee, coffee makers, teas and other beverages with its innovative brewing technology, today announced its business results for the 13 weeks ended March 28, 2015.

Net Sales by Product

Net sales of $1.1 billion increased 2% versus the prior year period primarily driven by growth in sales of pods ⁽previously referred to as portion packs) partially offset by lower brewer and accessory sales. Foreign currency exchange rates negatively impacted sales by approximately 1 percentage point. Excluding the impact of foreign currency exchange rates, total net sales grew 3% and total Keurig beverage system sales grew 4% compared to the prior year period.

Net sales for the domestic segment increased 3% in the quarter while sales in the Canada segment declined 5% on a reported basis and grew 6% excluding the impact of foreign currency exchange rates.

Total pod net sales increased 7% in the quarter while brewers and accessories net sales declined 23%. Other product net sales declined 5% compared to the prior year period.

Pods

• The 7% increase in the quarter in pod net sales compared to the prior year period was due to a 14% increase in equivalent servings² volume and a 1 percentage point increase due to net price realization. This was partially offset by a 7 percentage point decrease due to product mix and a roughly 1 percentage point negative impact from foreign currency exchange rates.

Brewers and Accessories

• For the quarter, 1.4 million Keurig® system brewers were sold including 1.3 million sold by Keurig and 0.1 million reported sold by Keurig's licensed brewer partners. This brewer shipment number does not account for consumer returns.
• The 23% decline in Keurig's brewer and accessory net sales compared to the prior year period was primarily due to a 22% decline in brewer sales volume, driven by high inventory levels at retail which negatively impacted shipments in the quarter and a difficult year ago comparison. Brewer net price realization declined by 1 percentage point and foreign currency exchange rates negatively impacted brewer net sales by roughly 1 percentage point. This was partially offset by 2 percentage points of positive brewer mix.
• Additionally, accessory net sales declined 31% compared to the prior year period.

Other Products

• Sales of other products declined 5% during the quarter from the prior year period primarily due to the continuing demand shift from traditional coffee package formats to pods.
• For the quarter, gross margin declined 80 basis points versus prior year to 40.7% of net sales. The table below quantifies the changes in gross margin period to period. Obsolescence of finished goods includes a $10 million charge related to the Rivo® brewer in the second quarter which negatively impacted gross margin by 90 bps. View the full report here.