Solo Brands (NYSE: DTC), the makers of the popular Solo Stove, released earnings this morning for the quarter ending March 31, 2023. They beat financial estimates on the top and bottom lines of their business. Beyond the financial performance, these are the key takeaways from the call.
Wholesale Continues to Grow
Solo Brands used to be completely focused on direct-to-consumer business, hence the stock ticker DTC. Consistent with their previous quarter, that’s been changing.
Their net sales increased 7.3% to $88.2 million on the quarter, but the mix is very different. Wholesale revenues increased 52.3% to $33.5 million, compared to $22.0 million in the same quarter last year, and direct-to-consumer sales decreased 9.1% to $54.8 million compared to $60.2 million a year ago.
That brings their wholesale business to about 38.0% of their total sales. It’s a much greater chunk of their business than in quarters past.
CEO John Merris reiterated on the call that it’s good for the business overall. It helps attract a different consumer, so it doesn’t cannabilize their direct-to-consumer business.
Improved Shipping and Distribution
Solo Brands is seeing improved logistics costs on both sides of their supply chain. They’re seeing a tailwind from improved container rates for inbound shipping on the gross margin side, but they’re also getting better distribution rates.
Their volume increases as their business has grown has meant improved contracted rates. They are seeing that with distribution partners such as UPS, DHL, FedEx, etc.
Mesa and Pi Broaden their Market Size
While Solo Stove is known for their smokeless fire pits, some of their product launches over the last year have been key to their success. Namely, with the Mesa tabletop fire pit and the Pi pizza oven.
The Mesa is a sub-$100 product, which is appealing to a different consumer than their full-size fire pits. It also enlarges their market to include consumers that are space constrained.
The Pi pizza oven on the other hand, is an offering for consumers that may not be drawn to Solo Stove for the fire pits.
Solo Brands is a analytics focused company that strives to learn about their customers and promote repeat transactions and cross-selling. That’s why both the Pi and Mesa are a good entry point into Solo Stove. They present opportunities for future sales.
New Products Coming
We ended 2022 with a ton of new releases from Solo Stove. This year we’re seen the Mesa XL, a pellet adapter for fire pits, and custom etching. We’re not done with new products though.
Solo Stove believes in the value of innovation for their success and has more products planned for this year. They were light on the details, but we’re excited to see what they have in store.