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Before the COVID-19 pandemic shut down businesses and activities across the U.S., Molson Coors Beverage Co. was managing the aftermath of a shooting at its Milwaukee brewery, which took a heavy toll on the business, first-quarter results show.
An employee began shooting at the Milwaukee facility on Feb. 26, leaving six dead, including the shooter.
“While this may have been a passing tragedy for those outside the company, it impacted every employee in different ways,” said Gavin Hattersley, chief executive of Molson Coors TAP, -11.17% , on the company’s Thursday earnings call, according to a FactSet transcript. “It changed the employee experience in our company forever. And it materially impacted sales to wholesalers in late February and early March.”
The brewery was shuttered for a week, and took days to get back to full capacity when it reopened, which impacted shipments in March, Hattersley said.
Then, as with all businesses, Molson Coors was impacted by the COVID-19 outbreak.
“Pantry loading did create a significant surge in off-premise sales in North America during the latter part of March across a number of our brands,” Hattersley said. “However, this pantry load has not continued into April. And while off-premise sales continue to perform well, we do not expect them to fully offset the loss of the on-premise volume.”
In other words, the closure of bars, sporting stadiums and other venues where beer is sold is expected to put pressure on full-year results, which won’t be offset by sales at grocers and other retailers.
Molson Coors estimates that off-premise sales accounted for 23% of the 2019 tally, 17% in North America and 50% to 55% in Europe. “[I]n nearly all of our markets the on-premise business has been effectively reduced to zero,” the company said in its earnings release.
For the first quarter, Molson Coors reported adjusted earnings and sales that beat expectations.
The company is taking cost-cutting measures, including cutting capital expenditures by $200 million and furloughing certain European workers and staff at North American hospitality businesses.
Molson Coors says it’s seeing consumers shift their purchasing to larger pack sizes and to brands like Miller Lite and Coors Lite. Executives say it’s shoppers reverting to brands they “know and trust.”
Other brands in the Molson Coors portfolio include Blue Moon and Carling.
“We are seeing evidence of North America consumer trade-down, with economy brands outperforming the broader product portfolio in April,” wrote analyst Bill Kirk at MKM Partners. “Further, we underestimated the contribution from on-premise account to the Europe business, accounting for the 1Q net sales miss versus our numbers and the outsized disappointment in Europe.”
MKM rates Molson Coors stock buy with a $59 price target.
Molson Coors stock closed Thursday down 11.2%, and has tumbled nearly 31% over the past year. The S&P 500 index SPX, -0.92% has slipped 0.4% over the past 12 months.
