Even Star Johansson Can’t Help SodaStream as Stock Sinks 26%; SodaStream benefits from the so-called razor-blade model of retailing where profits rely on customers repeatedly buying complementary products such as carbonation cannister

January 16, 2014 Leave a comment

Even Star Johansson Can’t Help SodaStream as Stock Sinks 26%

A year ago, SodaStream International Ltd. (SODA) climbed to a six-month high in New York after unveiling plans for its debut Super Bowl commercial. No such luck this year. The home-soda machine maker plunged 26 percent in its first day of trading after saying it tapped Hollywood actress Scarlett Johansson for a spot during the football game as investors focused on the company’s worse-than-forecast earnings.SodaStream reported preliminary adjusted net income of $52.5 million for 2013, below the $65.4 million median estimate in a Bloomberg survey of four analysts. Chief Executive Officer Daniel Birnbaum said after the earnings were released yesterday that he expects some “headwinds” to extend into this year, overshadowing the Jan. 10 announcement that Johansson will become the face of SodaStream’s new marketing campaign.

“They’re up against a more difficult comparison this year,” Philip Terpolilli, an Independence, Ohio-based analyst at Longbow Research who downgraded the stock to neutral from buy on Dec. 6, said by phone yesterday. “This year there will be a celebrity in it, but at the same time people are more aware of the product than they were last year.”

Shares of the Lod, Israel-based company plunged to $36.94 in New York yesterday, the biggest decline since August 2011. The stock gained 11 percent last year. SodaStream has declined 42 percent since Oct. 29, the day before the company reported third-quarter sales that fell short of analysts’ estimates, the first miss on record.

Revenue Miss

SodaStream forecasts annual revenue of $562 million, which compares with a $564.1 million projection. The benchmark TA-25 Index (TA-25) slipped 0.8 percent to 1,332.60 at 9:56 a.m. in Israel. The gauge has gained 9.3 percent in the past 12 months.

“We failed to deliver our profit targets and are disappointed in our fourth-quarter performance,” Birnbaum said in a statement released yesterday after the results were published. “These preliminary results reflect a challenging holiday selling season in the U.S.”

Yonah Lloyd, SodaStream’s chief corporate development and communications officer, didn’t respond to an e-mailed request for comment yesterday.

On Dec. 4, 2012, the soda producer’s stock climbed to a five-month high after news it would run its first-ever Super Bowl commercial the following February. A week before the game, the stock was at its highest in 17 months.

“We expected some weakness in U.S. sales but are surprised by the magnitude of the company’s gross margin and earnings miss,” Jim Chartier, an analyst at Monness Crespi Hardt & Co. who downgraded the stock to neutral from buy, wrote in a note to investors yesterday. “While we continue to believe in the story longer term, we are moving to the sidelines until we have greater clarity on the company’s gross margin issues.”

SodaStream benefits from the so-called razor-blade model of retailing where profits rely on customers repeatedly buying complementary products such as carbonation cannisters and flavors. Surveys of SodaStream products among U.S. retailers from Wal-Mart Stores Inc. to Costco Wholesale Corp. showed modest sales growth from the prior year during the holidays, according to Longbow.

To contact the reporters on this story: Elena Popina in New York at epopina@bloomberg.net; Gabrielle Coppola in New York at gcoppola@bloomberg.net

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Kee Koon Boon (“KB”) is the co-founder and director of HERO Investment Management which provides specialized fund management and investment advisory services to the ARCHEA Asia HERO Innovators Fund (www.heroinnovator.com), the only Asian SMID-cap tech-focused fund in the industry. KB is an internationally featured investor rooted in the principles of value investing for over a decade as a fund manager and analyst in the Asian capital markets who started his career at a boutique hedge fund in Singapore where he was with the firm since 2002 and was also part of the core investment committee in significantly outperforming the index in the 10-year-plus-old flagship Asian fund. He was also the portfolio manager for Asia-Pacific equities at Korea’s largest mutual fund company. Prior to setting up the H.E.R.O. Innovators Fund, KB was the Chief Investment Officer & CEO of a Singapore Registered Fund Management Company (RFMC) where he is responsible for listed Asian equity investments. KB had taught accounting at the Singapore Management University (SMU) as a faculty member and also pioneered the 15-week course on Accounting Fraud in Asia as an official module at SMU. KB remains grateful and honored to be invited by Singapore’s financial regulator Monetary Authority of Singapore (MAS) to present to their top management team about implementing a world’s first fact-based forward-looking fraud detection framework to bring about benefits for the capital markets in Singapore and for the public and investment community. KB also served the community in sharing his insights in writing articles about value investing and corporate governance in the media that include Business Times, Straits Times, Jakarta Post, Manual of Ideas, Investopedia, TedXWallStreet. He had also presented in top investment, banking and finance conferences in America, Italy, Sydney, Cape Town, HK, China. He has trained CEOs, entrepreneurs, CFOs, management executives in business strategy & business model innovation in Singapore, HK and China.

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