Coffee Holding Co. Inc. announced its operating results for the fiscal quarter ended January 31, 2022:
Net sales
Net sales totaled $16,704,860 for the three months ended January 31, 2022, a decrease of $1,428,977, or 7.9%, from $18,133,837 for the three months ended January 31, 2021. The decrease in net sales was due to an approximately $1,323,000 decline in sales from the company’s Generations/Steep N Brew subsidiary due to loss of customers.
Cost of sales
Cost of sales for the three months ended January 31, 2022, was $12,433,252, or 74.4% of net sales, as compared to $13,654,169, or 75.3% of net sales, for the three months January 31, 2021. Cost of sales consists primarily of the cost of green coffee and packaging materials and realized and unrealized gains or losses on hedging activity. The decrease in cost of sales was due to the company’s decreased sales.
Gross profit
Gross profit for the three months ended January 31, 2022, amounted to $4,271,608 or 25.6% of net sales, as compared to $4,479,668 or 24.7% of net sales, for the three months ended January 31, 2021. The increase in gross profits on a percentage basis was attributable to the factors listed above.
Operating expenses
Total operating expenses increased by $407,592 to $3,720,878 for the three months ended January 31, 2022, from $3,313,286 for the three months ended January 31, 2021. Selling and administrative expenses increased by $409,680 and officers’ salaries decreased by $2,088. Operating expenses increased primarily due to increases of approximately $213,000 in professional fees, $55,000 in freight costs and $139,000 in labor costs, partially offset by decreases in various other operating expense categories.
“We recorded a profit of $0.05 per share in the first quarter of 2022 compared to a profit of $0.12 per share in the first quarter of 2021. Although our gross profit margin increased from 24.7% to 25.6% compared to last year, the increase in our operating expenses amounted to an additional $0.07 per share, as inflationary headwinds had a negative effect on the company’s performance for the quarter. Although our gross profit margins were healthy by our historical standards, increases in freight, labor and the cost of steel prevented additional margin expansion during the three months ended January 31, 2022. Further, higher legal expenses of approximately $213,000 incurred during the quarter as a result of ongoing class action lawsuits negatively affected our results. Adjusted EBITDA for the quarter was approximately $804,000, including a non-cash charge of approximately $190,000 relating to our stock option plan. Fortunately, we expect these expenses will be lower in both our second and third quarters, amounting to $172,000 and $42,000, respectively, before being completely expensed prior to the start of our fourth fiscal quarter of 2022,” said Andrew Gordon, president and CEO of Coffee Holding Company.
“The decrease in our net sales was entirely due to the continued loss of customers from our Steep N Brew subsidiary while sales in our private label and branded coffee products in the legacy Coffee Holding division were steady compared to the first quarter of fiscal 2021, as sales to existing and new customers remained strong at the grocery channel level. However, sales of green coffee to smaller and medium size roasters declined during the period as many of our smaller roaster customers cut back on purchases and chose to purchase green coffee on a ‘hand-to-cup’, or as-needed, basis due to the elevated prices of green coffee compared to the prices in fiscal 2021,” continued Gordon.
“Overall, our business does remain strong despite of the current inflationary environment and we believe our sales, along with our profit margins will continue to improve throughout fiscal 2022,” concluded Gordon.
