Sonos added 1.4M new customers last financial year ending in October, but it did not help their overall result with the volume of sound products sold decreasing in 2022, compared to 2021.
In the last quarter sales fell 7% with IKEA making up 56% of Sonos sales.
The one bright spot was that revenues in Asia Pacific of which Australia is the biggest market increased 11%.
Patrick Spence Sonos CEO
Sonos are not saying how many consumers deserted the brand as several new premium brands enter the networked audio market.
In fiscal 2022, Sonos reported $1.752 billion in global revenues this was only achieved because of price rises in the last quarter.
Also in the last quarter revenue fell 12.03% to $316M Vs the same period last year despite double digit price rises, while net profit margins fell 733% for the year ending in October 2022 Vs 2021.
Margins were down 180 basis points to 45.4%, and adjusted EBITDA was $226.5 million.
Currently Sonos who is having to compete with Google, Amazon and Apple as well as premium brands such as Denon, Bowers & Wilkins and Devialet has 9% of the affluent household’s market in key demographics where they compete.
Sonos is not saying how many of these consumers were sold a product via the Companies direct sell programs which is stripping business away from retailers such as JB Hi Fi and Harvey Norman as well as the specialist channel who pioneered the market in Australia.
Currently Google is suing Sonos, and Eddie Lazarus Chief Legal and Financial Officer at Sonos claimed on an investor call that will “Continue hold Google accountable for their widespread infringement of patents”.
Sales of Sonos product sold via IKEA stores was down 2%. It also appears that consumers are deserting Sonos’s direct sell model with direct-to-consumer revenues declining 5%.
Key to the Sonos model is the custom install channel with installer solutions revenue growing 28%, driven by strong demand for a Sonos Amp and their Port products.
Lazarus said “we get very high SP multiple product purchases in the installer channel, which is a great base for us. And we also get very good margins out of that channel. So, on those bases, we love growing that channel”
He claimed the business is set to grow that channel in APAC in 2023.
The IS and DTC channels accounted for 44% of the Companies business.
Currently the business is sitting on a lot of inventory.
Fourth quarter ’22 inventory balance is $454 million, up 145% year over year.
Total inventories and finished goods were sitting at $407 million, up 163%.
Sonos CEO Patrick Spence said that the Company intends to slow down their “Pace of investment in2023”.
He is also predicting a flat 2023 as the business looks to increase share of the US$96 Billion audio market as well as further price rises due to FX issues.
