Laird Superfood, Inc. (NYSE:LSF) has officially transitioned from a turnaround story to a growth story, as evidenced by its impressive 22% year-over-year increase in net sales to $9.9 million in the first quarter of 2024. This growth was driven by strong performance across both the e-commerce and wholesale channels, showcasing the company's ability to execute on its strategic initiatives.
The e-commerce segment, which accounted for 59% of total net sales, grew by an impressive 33% year-over-year. This was led by a 48% surge in sales through Amazon.com, as the company continued to improve inventory management, marketing effectiveness, and its presence on the platform. The company's direct-to-consumer (DTC) business on lairdsuperfood.com and pickybars.com also saw a 25% increase in sales, driven by growth in subscriptions and repeat customers, as well as improved promotional strategies.
On the wholesale side, net sales grew by 10% year-over-year, with the company seeing growth across all measured categories, led by its coffee and instant latte products, which now make up the largest category at retail. The company's club business remains extremely healthy, and it continues to see growth in sales velocities following last year's quality event.
Laird Superfood's gross margin expanded significantly in the first quarter, reaching 40% compared to 23.1% in the prior-year period. This improvement was driven by the continued benefits of the company's transition to a variable-cost third-party co-manufacturing business model, as well as reduced trade discounts due to improved promotional efficiencies.
Operating expenses decreased by $1.1 million, or 18%, year-over-year, primarily due to lower personnel costs, reduced marketing spend, and broader strategic reductions in spending. This, combined with the higher gross margins, led to a 75% improvement in net loss, which was $1.0 million in the first quarter of 2024 compared to $4.1 million in the prior-year period.
The company's balance sheet remains strong, with $7.3 million in cash and no debt as of March 31, 2024. Cash burn in the first quarter was $400,000, a significant improvement from historical levels, driven by the company's continued discipline in managing operating expenses and working capital, including a $700,000 reduction in inventory.
Looking ahead, Laird Superfood has increased the upper end of its guidance for the full year 2024. The company now expects net sales of $38 million to $42 million, representing 11% to 22% growth compared to the prior year, and gross margins of 38% to 41%, a 7 to 11 percentage point improvement over 2023.
Business Overview
Laird Superfood is a leading provider of highly differentiated, plant-based, and functional foods, many of which incorporate adaptogens that may support a variety of brain functions. The company's core product categories include Superfood Creamer coffee creamers, Hydrate hydration products and beverage enhancing supplements, harvest snacks and other food items, and functional roasted and instant coffees, teas, and hot chocolate.The company's long-term goal is to build the first scale-level and widely recognized brand that authentically focuses on natural ingredients, nutritional density, and functionality, allowing it to maximize penetration of a multi-billion-dollar opportunity in the grocery market. Laird Superfood's products are sold through a diverse set of retail channels, including conventional, natural, and specialty grocery stores, club stores, and the company's own e-commerce platforms.
Financials
For the full year 2023, Laird Superfood reported net sales of $34.2 million, a net loss of $10.2 million, and negative operating and free cash flows of $10.8 million and $10.9 million, respectively. The company's balance sheet remains strong, with $7.3 million in cash and no debt as of March 31, 2024.In the first quarter of 2024, the company reported net sales of $9.9 million, a net loss of $1.0 million, and negative operating and free cash flows of $0.4 million and $0.4 million, respectively. The company's gross margin expanded significantly to 40% in the first quarter, up from 23.1% in the prior-year period, driven by the continued benefits of its transition to a variable-cost third-party co-manufacturing business model and reduced trade discounts.
Segmental Performance
Laird Superfood's net sales are primarily generated through two channels: e-commerce and wholesale. In the first quarter of 2024, the e-commerce segment accounted for 59% of total net sales and grew by 33% year-over-year, while the wholesale segment contributed 41% of net sales and grew by 10% year-over-year.Within the e-commerce segment, the company's sales through Amazon.com grew by an impressive 48% year-over-year, driven by improved inventory management, marketing effectiveness, and the company's presence on the platform. The company's DTC business on lairdsuperfood.com and pickybars.com also saw a 25% increase in sales, supported by growth in subscriptions and repeat customers, as well as more efficient promotional strategies.
In the wholesale segment, the company saw growth across all measured categories, led by its coffee and instant latte products, which now make up the largest category at retail. The company's club business remains extremely healthy, and it continues to see growth in sales velocities following last year's quality event.
Guidance and Outlook
Laird Superfood has increased the upper end of its guidance for the full year 2024. The company now expects net sales of $38 million to $42 million, representing 11% to 22% growth compared to the prior year, and gross margins of 38% to 41%, a 7 to 11 percentage point improvement over 2023.The company's management team is confident that the strategic initiatives implemented over the past 18 months, including the transition to a variable-cost third-party co-manufacturing business model and the optimization of its operating expenses, have positioned the business for sustainable growth and improved profitability.
Risks and Challenges
While Laird Superfood has demonstrated impressive growth and operational improvements, the company faces several risks and challenges that investors should be aware of. These include the company's limited operating history, its reliance on third-party suppliers and co-manufacturers, the highly competitive nature of the premium organic and natural food industry, and the potential for regulatory changes that could impact the company's operations.Additionally, the company's success is heavily dependent on the continued involvement and endorsement of its co-founders, Laird Hamilton and Gabrielle Reece, as well as its ability to maintain and grow its customer base, particularly in the e-commerce and wholesale channels.