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Sonos Goes From Bad To Worse, As Analysts Question Future Plans, Including Headphone Market Entry

Analysts are now sceptical as to the future of Sonos with current sales of networked speakers slumping as the Company punts on new products and direct sales and deals with Amazon who have lower trading terms than local retailers who stock Sonos, gear to turn around their fortunes.

The CEO of Sonos Patrick Spence is desperate, to stop the slump with the struggling US sound Company, punting on new products, and an entry into the headphones category which Spence claims could be worth $100M to the business.

Currently the business is losing share across most regions in the world including Australia and in most of the audio categories they compete in.

Once a darling of retailers such as JB Hi Fi and specialist audio dealers Sonos has recently reported results that do not look pretty, with their net loss in the last quarter coming in at US$69.7 million, which is US$39.1 million or 127.4% higher than the Net loss of $30.7 million in the same quarter last year.

In a blow to Australian retailers who established the Sonos brand in Australia the US audio Company Sonos became a first-party seller on Amazon.com in the U.S. Spence says this initiative will help to expand their reach to new customers.

This has seen them offer customers who initially purchased their products via JB Hi Fi and Harvey Norman along with specialist dealers a new ‘Special Upgrade Deal” with limited-time upgrade offers as long as they buy direct.

APC of which Australia is the largest Country in the group accounting for over 75% of the regions revenues, saw revenues plunge 29%.

Now “challenged” appears to be Spence’s new buzz word, each and every quarter he addresses shareholders of late.

A breakdown of the categories they operate in reveal that in their largest category networked speakers the Company only managed revenues of US $187.3 million which is down by $53.9 million or 22.4% compared to revenues of $241.2 million in the same quarter last year.

Their joint venture partnerships with Sonance, IKEA are also struggling, in the last quarter these relationships delivered revenues of $16.1 million which was down $2.8 million or 14.6% compared to revenues of $18.9 million in the quarter last year.

The bright part of their business is via custom installers who an increase with revenue of $49.3 million which is $5.1 million or 11.7% higher than revenues of $44.1 million in the same quarter in 2023.

Overall, the business only managed to deliver revenues in the second quarter of fiscal 2024 came in at $252.7 million, down $51.5 million or 16.9% from revenues of $304.2 million in the same quarter in fiscal 2023.

Unit sales in fiscal 2023 were just under a million units at 998,000. This year, unit sales came in at 747,000, more than a quarter million units fewer or a 25.2% drop in unit sales, as compared to the same quarter last year.

This is a big decline for a business that has always struggled to make a profit with analysts struggling to rate the Company.

On a recent conference call with analysts, Morgan Stanley questioned Spence’s enthusiasm for the upcoming new product range that includes headphones, the analyst said “Because we see most consumer companies flagging real caution in mind of the spending environment. Your outlook for this new product has been unwavering”.

“So, can you maybe just help us connect the dots? What’s driving the confidence as we see maybe some of the macro outlook, especially as it relates to consumer spending, remain kind of unchanged, negative, maybe deteriorating?”

Observers claim that Sonos who have no qualms trying to force consumers into speaker upgrades despite their being nothing wrong with their existing Sonos speakers are now punting the future of the business on new products because of waning demand for their current offering.

Spence claims that he is confident in sales of the new product in a new category, because:

1) It’s a new category for Sonos, which means it’s incremental revenues for Sonos.
2) It’s a large category with plenty of ramp up.
3) He also claims that it’s a growing category.

Several analysts expressed reservations about the Companies plans and above all their future in a market where Apple has dropped both Logitech and Sonos speakers from their stores.

Last week ChannelNews was the first Australian media Company to reveal the new Sonos headphones following a leak in Germany by a supplier to Sonos, which some are now questioning as to whether it was a deliberate leak ahead of their shocking financials announcement.

Sonos now claim that they will be rolling out there “new product” in the third quarter and that they expect at least $100 million being added this year’s revenues, this is despite previous new products failing to lift revenues.

In a blow to Australian retailers who established the Sonos brand in Australia the US audio Company Sonos became a first-party seller on Amazon.com in the U.S. Spence says this initiative will help to expand their reach to new customers.

This has seen them offer customers who initially purchased their products via JB Hi Fi and Harvey Norman along with specialist dealers a new ‘Special Upgrade Deal” with limited-time upgrade offers as long as they buy direct.



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