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New Sonos Products Fail To Sell Through Stock Freefalls

Sonos shares have crashed 24% after the US audio business who overdelivered hundreds of products to customers last month failed to deliver any growth in the last quarter with their new products failing to sell through as expected.

EBITDA declined 23% with the Company admitting that they are uncertain as to what the next 12 months hold.

Revenue decreased nearly 2% year-over-year to US $371.8 million as the business struggled to find growth despite a surging market after COVID bans were lifted.

In Q3 ending June 30th Q3 adjusted EBITDA was only $42.1M, down -10%.

Sonos CEO Patrick Spence said, “We have seen the macroeconomic backdrop become significantly more challenging for us starting in June as the dollar’s appreciation and high inflation have adversely affected consumer sentiment globally, particularly in the categories in which we play. As a result, revenue missed our expectations for Q3, and we are adjusting our FY22 outlook accordingly.”

The business that struggled from higher component costs, is also facing margin pressure with the business failing to grow sales of their new cheap bottom end Ray soundbar.

The launch of the next Sonos product tipped to be a Sonos Sub Mini – has been pushed back after their latest shocker rersult.

Sonos spokesperson Erin Pategas confirmed the news in an email to the Verge claiming “I can confirm we decided to push an anticipated product launch from Q4 ’22 into Q1 ’23.”

The affordable Sub Mini appeared at the FCC in June, prompting speculation that it would launch this year.

Now, it appears to be heading our way in the first fiscal quarter of 2023 or late 2022.

In comparison archrival Vox International reported net sales of US $635.9 million, a year-over-year increase of 12.8% their consumer business grew 9%.

In a blow to the business CFO, Brittany Bagley, announced that she is set to quit Sonos to pursue what has been described as “Another professional opportunity”.

In an earnings call Spence said “Our results in the quarter were negatively impacted by three primary factors. There was a softening of consumer demand in our product categories starting in June. We believe this is in part a reflection of consumers shifting their near-term focus from goods to services and travel. Second, we remain supply constrained in some of our key products like Amp and Beam”

Credit: The Verge

He added “As a result, we continue to have a backlog which caused us to miss out on revenue opportunities in the quarter. And third, the strengthening of the U.S. dollar throughout the quarter resulted in a $15 million foreign currency headwind”.
It also emerged that the Companies new Sonos Ray sound bar has failed to impress consumers.

“Ray is significantly missing our expectations for the year” Spence admitted.

Spence told a conference call “Although we cannot predict when macroeconomic conditions will normalize, we remain confident that, when they do, we will return to double-digit revenue growth.

Sonos extended its timelines of achieving the targets the company previously announced of adjusted EBITDA margins of 15-18%, gross margins of 45-47% and total revenue of $2.5 billion beyond 2024, because of evolving and uncertain macroeconomic backdrops.



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