Mission Produce Inc. shares plunged in after-hours trading Thursday following an earnings report that showed the effects of rapidly declining avocado prices.
Mission Produce
AVO,
reported a fiscal fourth-quarter loss of $42 million or 59 cents a share, on net revenue of $238 million, basically flat with a year ago. After adjusting for a goodwill impairment, stock compensation and other effects, the company reported earnings of 13 cents a share.
Analysts on average were expecting adjusted earnings of 34 cents a share on sales of $250 million. Mission Produce stock fell 14% in after-hours trading, after closing with a 3.4% decline at $14.61.
Executives noted that avocado prices have been dropping, after rising quickly at times last year, including when imports from Mexico were blocked for a time. Executives stated that prices declined 10% from the same period last year, a drastic change from the rest of the year — Mission Produce’s full-year sales showed a 28% increase in average selling prices from the year before, despite including that fourth-quarter decline.
“Our fiscal fourth-quarter financial performance was impacted by a confluence of variables, especially with regard to the rapid decline in pricing, which undermined our ability to drive the per-unit margins that we have generated historically,” founder and Chief Executive Steve Barnard said in a statement Thursday. “Persistent cost inflation, combined with a suboptimal size curve from our owned production and a delay to our seasonal transition to the Mexican production, resulted in an unfavorable mix, lower relative pricing and temporary margin compression.”
In a conference call later Thursday, Barnard was more specific about a sudden drop in pricing this fall.
“Trends reversed sharply during the fiscal fourth quarter, with the onset of the new Mexican season, and drove prices down approximately 35% as compared to the fiscal third quarter,” he said.
Executives expect that decline to last into the fiscal first quarter, projecting year-over-year price decreases of 20% to 25%, but see stability in the forecast for 2023.
“With respect to fiscal 2023, we see a more normal marketplace emerging, highlighted by better and more consistent supply conditions, which provides a constructive foundation for the industry to drive consumption and expand growth in new geographies,” Barnard said.
Mission Produce shares have outperformed major indexes so far in 2022, declining 6.9% through Thursday’s close, while the S&P 500 index
SPX,
has fallen 19.8% and the Dow Jones Industrial Average
DJIA,
has dropped 8.2% this year.