National Beverage Corp. fell the most in two decades after the owner of LaCroix brand sparkling water posted disappointing results and was downgraded to sell at Guggenheim. The CEO blamed the weak quarter on "injustice."
"We are truly sorry for these results stated above. Negligence nor mismanagement nor woeful acts of God were not the reasons—much of this was the result of injustice!" CEO Nick Caporella said in a statement.
Moving past the unusual statement, analyst Laurent Grandet wrote that the company's sparkling water brand LaCroix is unlikely to see a sales rebound given the "prolonged softness in U.S. retail and the increasing competitiveness of the category." Grandet added that social media trends are "decisively negative" and slashed the firm's price target on the stock to $45 a share from $72.
The brand's growth has been hurt by negative media attention that called into doubt the company's claims that LaCroix sparkling water is made with "natural" ingredients. Facing a class action suit, the company has continued to defend itself, saying results of testing performed by an independent laboratory confirm that the vendor-supplied ingredients "were derived from natural sources, such as fruit, instead of being artificially created in a lab."
Grandet points out that since the negative media attention last October, growth has "rapidly" decelerated, adding that gross margin in the latest quarter was about 390 basis points short of his estimate. This is the second straight quarter that sales have missed analyst estimates, and the stock has fallen more than 50 percent since Oct. 1.
To make matters worse, the competitive environment continues to get tougher, as brands like Coca-Cola's Topo Chico gains traction. Meanwhile, PepsiCo intends to invest heavily in Bubly again this year, Grandet noted.
Shares of Fort Lauderdale, Florida-based National Beverage Corp. plunged as much as 26 percent on Friday, their worst intraday drop since 1994, to the lowest level since February 2017.