SodaStream Q1 Net Falls 85.3 Percent

SodaStreamAIRPORT CITY, Israel-Significant cost increases and a reduction in gross margin hacked into SodaStream’s first-quarter net income, which fell 85.3 percent to $1.8 million.

Operating expenses jumped 17.9 percent in dollars and 745 basis points as a percentage of sales, to 50.4 percent—the result of increased advertising and promotion costs, plus additional expenses related to SodaStream’s newly acquired Italian distributor and additional infrastructure. Gross margin slumped 214 basis points to 52.3 percent, due to unfavorable changes in foreign currency exchange rates and an increase of higher-cost soda makers in the sales mix.

Net sales in the quarter, which ended on March 31, edged up 0.5 percent. Sales of soda-maker starter kits fell 25 percent, offset by 15 percent gains each in sales of consumables and “other.”

Daniel Birnbaum, SodaStream’s CEO, said the results were in line with the company’s expectations. Birnbaum noted that soda-maker sell-in in the United States from the challenging holiday season had a negative impact, but that growth outside of the U.S. was strong.

“Our global base of SodaStream users inclusive of the U.S. remains very active, evidenced by strong consumable sales growth, giving us added conviction in the attractiveness of our home carbonation system,” Birnbaum said. “We are in the process of adjusting our marketing and selling strategies in order to reaccelerate soda-maker demand and further increase household penetration.”