There were some interesting take-aways from Solo Brands’ earnings release today. Solo Stove suffered heavy revenue declines, as expected, but Chubbies exceeded expectations with 43.9% revenue growth over the prior year quarter.
With their stock being delisted, Solo Brands is actively looking to restructure their debt and make drastic improvements to their income statement. That’s not just reducing expenses but also changing their promotion heavy selling model.
We are aware that conflict arose in the Solo Stove retail channel due to our heavy promotional approach in our DTC channel last year. We have now revised our promotional calendar so that our DTC channel and retail partners are fully aligned. Although this significantly impacted Solo Stove direct-to-consumer results, this is a necessary change to align our direct-to-consumer strategy with our key retail partners.
In addition, we are implementing a strategic repricing of our portfolio where warranted and terminating low-profit retail programs.
John Larson, Interim CEO of Solo Brands
On the expense side of the income statement, Solo Brands did another round of layoffs in April.
We told you last quarter about our headcount reductions in January, and we made further cuts in April. We also eliminated open positions, adjusted our bonus structure and suspended our 401(k) match until further notice. These are hard, but necessary decisions. We have also continued to work on rightsizing our facilities and distribution footprint.
John Larson, Interim CEO of Solo Brands
Much of the focus of Solo Stove’s poor performance over the past year and a half has been on their marketing spend. Getting more value from their marketing dollars continues to be a theme that’s heavily discussed.
We have eliminated several large legacy marketing programs from last year. We are also focused on a return on ad spend as a critical metric. Our marketing team, led by our CMO, Liz Vanzura is incorporating a contribution margin analysis model to inform our return on ad spend targets. In addition, we are actively eliminating unprofitable sponsorships. As you can tell, we are working to directly tie marketing investments to profit generation and will adjust as appropriate.
John Larson, Interim CEO of Solo Brands
Innovation
Solo Stove knows that a key to turning their business around is through releasing innovative new products. They had minimal innovation recently, when that was central to their growth in prior years. They’ll be changing that this year with five planned innovations for Solo Stove.
While Chubbies and water sports have continued to innovate with some great new products, we are excited to share that we have stepped up the innovation in our Solo Stove division with 5 new products launching this year, beginning with the introduction of our new [Windchill] 47 cooler hitting the markets this week.
John Larson, Interim CEO of Solo Brands
Solo Stove purchased the outdoor cooler / air conditioner brand IcyBreeze, then at the end of last year said they were ending the brand to release a similar product under the Solo Stove brand in the future. Judging by the Windchill 47 cooler name, I would guess that the replacement product will be released this week.
Tariffs
Solo Stove’s fire pits are all produced in China. That’s an issue with current tariff environment, especially considering the financial stress of the company. They’re working on diversifying their supply chain as soon as they can to reduce tariff expense.
Tariffs are having a significant impact on our industry and our business. While tariffs did not impact our first quarter results, we have taken proactive steps to offset incremental costs that are expected to affect us starting in the second quarter.
First, we are diversifying our manufacturing footprint where possible and reducing our reliance on China-sourced products starting with our June 1 production. This includes expanding to suppliers in lower tariff countries where feasible and we are beginning to explore nearshore options and U.S. production alternatives.
Laura Coffey, CFO of Solo Brands