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Crimson Wine Group’s (CWGL - Free Report) third-quarter 2024 results present both encouraging progress and persistent challenges. The company’s efforts to expand direct-to-consumer sales through digital platforms and tasting rooms reflect a strategic pivot amid shifting market dynamics. The decline in wholesale revenues highlights the difficulties faced in a competitive and fluctuating landscape.
This analysis dives into the factors shaping Crimson Wine's third-quarter results, examining how the company's financial strategies, cost management efforts and evolving market approach impact its performance and growth outlook.
Q3 Results
The company reported third-quarter 2024 break-even earnings per share, down from 8 cents in the prior-year quarter. The decrease resulted from a sales decline and profitability pressures in a few segments.
Crimson Wine’s total net sales of $16.9 million declined 6% from $18 million in the year-ago quarter.
The drop in the top line was mainly attributable to a 13% decrease in wholesale net sales, impacted by a slowdown in the domestic and export markets. The negatives were partially offset by the direct-to-consumer (DTC) segment’s growth of 5% on higher sales in e-commerce and tasting rooms, aided by promotions and increased customer visitations.
Segmental Analysis
Wholesale Segment: Wholesale revenues fell to $9.4 million in the third quarter of 2024 from $10.9 million in the previous-year quarter. This dip was attributed to weakened demand, especially in the domestic markets, and declining exports to Europe and Asia.
DTC Segment: DTC sales grew 5% to $6.4 million in the third quarter of 2024 from $6.1 million in the previous-year quarter on higher sales in e-commerce and tasting rooms.
Other Revenues: This segment’s revenues moved up 2% to $1.1 million in the third quarter of 2024 from $1.05 million in the previous-year quarter. Bulk wine and grape sales were largely consistent with the prior year.
Gross Profit & Margin Analysis
Overall gross profit fell 4% to $8.1 million in the third quarter of 2024 from $8.4 million in the previous-year quarter.
Despite increased sales, the DTC segment’s gross margin decreased slightly to 65% in the third quarter of 2024 due to lower freight cost recovery than the prior year. Meanwhile, the “Other” category saw a significant drop in gross profit due to higher inventory write-downs.
Operating Expenses
Sales and marketing expenses rose 3% year over year to $4.7 million in the third quarter of 2024, driven by increased sales incentives, consistent with efforts to support the DTC growth strategy.
G&A expenses grew 7% year over year to $3.8 million in the third quarter of 2024, mainly due to a $0.5-million increase in sales tax expenses and $0.2 million in professional fees. The effect of these increases was partially offset by the reversals of previously recorded stock-based compensation expenses.
Interest expenses marginally decreased due to lower principal balances on long-term loans.
Other income fell 73% to $0.4 million in the third quarter of 2024 from $1.9 million in the previous-year quarter. This decrease reflects the absence of the $1.9-million settlement payout received in the previous year from the Fire Victim Trust — a fund established for losses from the 2017 wildfires.
Cash & Capital Expenditure
Crimson Wine reported $24.3 million in cash and cash equivalents, up from $22.8 million at the end of 2023.
The company's long-term debt was reduced slightly, with principal balances declning $0.8 million to $15.7 million.
The company spent $4.3 million in capex on property and equipment acquisitions, down from $7.5 million in the previous year.
Financial Performance
Crimson Wine's performance was constrained by external and internal factors impacting its revenue channels. The 13% decline in wholesale revenues underscores the effects of weaker demand and shifting consumer trends. In the DTC channel, the company leveraged e-commerce and tasting room channels to offset declines in wine club sales, which have been impacted by membership attrition. The gross margin saw an improvement in the wholesale segment, aided by a favorable product mix and cost control. This was offset by challenges in other revenue sources.
The increase in G&A costs due to sales tax and professional fees reflects CWGL's investment in operational support but also highlights the need to manage its cost structure in a challenging market.
Other Developments
Crimson Wine has also undertaken share repurchases under its 2023 Repurchase Program. It bought back approximately 324,602 shares for $1.9 million in the first nine months of 2024. Additionally, the company received a settlement payment from the Fire Victim Trust related to the 2017 wildfires, although this payout was lower than last year’s amount. The settlement continues to provide incremental financial support for recovery efforts from past disasters.
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Crimson Wine Reports Breakeven Q3 Earnings, Y/Y Sales Decline
Crimson Wine Group’s (CWGL - Free Report) third-quarter 2024 results present both encouraging progress and persistent challenges. The company’s efforts to expand direct-to-consumer sales through digital platforms and tasting rooms reflect a strategic pivot amid shifting market dynamics. The decline in wholesale revenues highlights the difficulties faced in a competitive and fluctuating landscape.
This analysis dives into the factors shaping Crimson Wine's third-quarter results, examining how the company's financial strategies, cost management efforts and evolving market approach impact its performance and growth outlook.
Q3 Results
The company reported third-quarter 2024 break-even earnings per share, down from 8 cents in the prior-year quarter. The decrease resulted from a sales decline and profitability pressures in a few segments.
Crimson Wine’s total net sales of $16.9 million declined 6% from $18 million in the year-ago quarter.
The drop in the top line was mainly attributable to a 13% decrease in wholesale net sales, impacted by a slowdown in the domestic and export markets. The negatives were partially offset by the direct-to-consumer (DTC) segment’s growth of 5% on higher sales in e-commerce and tasting rooms, aided by promotions and increased customer visitations.
Segmental Analysis
Wholesale Segment: Wholesale revenues fell to $9.4 million in the third quarter of 2024 from $10.9 million in the previous-year quarter. This dip was attributed to weakened demand, especially in the domestic markets, and declining exports to Europe and Asia.
DTC Segment: DTC sales grew 5% to $6.4 million in the third quarter of 2024 from $6.1 million in the previous-year quarter on higher sales in e-commerce and tasting rooms.
Other Revenues: This segment’s revenues moved up 2% to $1.1 million in the third quarter of 2024 from $1.05 million in the previous-year quarter. Bulk wine and grape sales were largely consistent with the prior year.
Gross Profit & Margin Analysis
Overall gross profit fell 4% to $8.1 million in the third quarter of 2024 from $8.4 million in the previous-year quarter.
Despite increased sales, the DTC segment’s gross margin decreased slightly to 65% in the third quarter of 2024 due to lower freight cost recovery than the prior year. Meanwhile, the “Other” category saw a significant drop in gross profit due to higher inventory write-downs.
Operating Expenses
Sales and marketing expenses rose 3% year over year to $4.7 million in the third quarter of 2024, driven by increased sales incentives, consistent with efforts to support the DTC growth strategy.
G&A expenses grew 7% year over year to $3.8 million in the third quarter of 2024, mainly due to a $0.5-million increase in sales tax expenses and $0.2 million in professional fees. The effect of these increases was partially offset by the reversals of previously recorded stock-based compensation expenses.
Interest expenses marginally decreased due to lower principal balances on long-term loans.
Other income fell 73% to $0.4 million in the third quarter of 2024 from $1.9 million in the previous-year quarter. This decrease reflects the absence of the $1.9-million settlement payout received in the previous year from the Fire Victim Trust — a fund established for losses from the 2017 wildfires.
Cash & Capital Expenditure
Crimson Wine reported $24.3 million in cash and cash equivalents, up from $22.8 million at the end of 2023.
The company's long-term debt was reduced slightly, with principal balances declning $0.8 million to $15.7 million.
The company spent $4.3 million in capex on property and equipment acquisitions, down from $7.5 million in the previous year.
Financial Performance
Crimson Wine's performance was constrained by external and internal factors impacting its revenue channels. The 13% decline in wholesale revenues underscores the effects of weaker demand and shifting consumer trends. In the DTC channel, the company leveraged e-commerce and tasting room channels to offset declines in wine club sales, which have been impacted by membership attrition. The gross margin saw an improvement in the wholesale segment, aided by a favorable product mix and cost control. This was offset by challenges in other revenue sources.
The increase in G&A costs due to sales tax and professional fees reflects CWGL's investment in operational support but also highlights the need to manage its cost structure in a challenging market.
Other Developments
Crimson Wine has also undertaken share repurchases under its 2023 Repurchase Program. It bought back approximately 324,602 shares for $1.9 million in the first nine months of 2024. Additionally, the company received a settlement payment from the Fire Victim Trust related to the 2017 wildfires, although this payout was lower than last year’s amount. The settlement continues to provide incremental financial support for recovery efforts from past disasters.