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Sonos APAC Q3 Sales Slump 45.6%, Losses Climb To $79M

Don’t hold your breath hoping that Apple will buy Sonos and don’t hold your breath that the US sound Company will finally be able to make a decent profit.

After their latest financial results were released Sonos who has struggled to make a profit for more than a decade, saw their shares crash more than 15% as investors dumped the stock.

While revenues met expectations for the June-quarter the sound Company reported a net loss of $79.62 million compared to a loss of US$19.55 million in the same quarter 2019.

Supplied undated image obtained Thursday, Jan. 23, 2014 of the Sonos Play: 1 wireless speaker, the company’s entry-level speaker, which costs $299. (AAP Image/Sonos) NO ARCHIVING, EDITORIAL USE ONLY

It was also reported that in Q3 FY2020, Sonos sold 923,267 products, this was down 31.3% year-over-year.

This was despite the Company expanding their direct sell model

Revenues were $249.3 million, representing a 4.2% decline year-over-year and 3.1% decline on a constant currency basis.

Also down was gross margin this decreased 110 basis points year-over-year to 44.0%.

In the Asia Pacific region of which Australia is a major contributor revenue decreased by 45.6%. The Company claimed that this was “primarily due to the problems associated with IKEA sales.

In a kick in the guts for their retail partners Sonos confirmed that they have expanded their direct sell model by $299% by driving consumers away from retail outlets to their own web site as opposed to a retail partners site allowing them to pocket the margin paid to retail partners.

CEO Patrick Spence bragged about the Company achieving “Better than expected” Direct To Consumer (DTC) third quarter financial results.

He claimed in a letter to shareholders that Sonos had expanded their sales “primarily through record direct-to-consumer (DTC) revenue”.

A major concern going forward is that the company has ended the quarter out of stock of seven key products with the Company set to struggle in the fourth quarter.

One analyst said, “While management sounded confident in meeting Q4 demand, we worry about the commentary that the Malaysia supply chain diversification may not be complete until mid-2021,”.

“With Sonos facing its toughest comp in the holiday quarter…we believe the stock setup for the rest of the year could be risky.”

It was also revealed that the Company is prioritising the USA market over markets such as Australia and New Zealand as they try to beat potential Tariff issues in the USA.

In late June, the Company slashed 12% of their global team and close down six satellite office locations and their New York retail
store.

The Company is continuing to experiment with new business models and partnerships, “like our existing partnership with IKEA, Sonos for Business, and Sonos Radio, among others” Spence reported.

Legal Action

Sonos is now claiming that they were successful in their legal action against Denon which never went to Court and despite both Companies claiming that both including Sound United the owners of Denon and Sonos had reach a mutual agreement. Sound United denied any infringement of Sonos intellectual property.

“We previously achieved a successful outcome against Denon and, as announced last week, we have now done so again in our litigation against Lenbrook Industries, the maker of Bluesound products” the Company claimed.

Sonos who has taken Google to Court said that ‘Under a confidential settlement, Lenbrook Industries has entered into a multi-year agreement
for a license to Sonos patents for all BluOS enabled devices worldwide.

Sonos is still in a legal fight up against Google in the United States International Trade Commission.

“We remain confident in our case, which is set for trial towards the end of February 2021”.

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