Today Solo Stove parent company, Solo Brands, participated at the Credit Suisse HALO Investment Summit. Solo Brands reported earnings recently where they disappointed on revenue but affirmed their current year guidance. They also announced a new CFO to their leadership team.
Credit Suisse analyst Kaumil Gajrawala talked with Solo Brands CEO John Merris at the event.
By the Numbers
There were quite a few numbers given about Solo Brands and Solo Stove. Below are the highlights.
- 85% of their business is Direct-To-Consumer (DTC)
- 50% of new business comes from referrals
- 70% of Solo Brands’ revenue is from the Solo Stove business line
- They have 3.6 million total customers
- 1.2 million are Solo Stove customers
- 40,000 have shopped more that one of the brands in the Solo Brands’ portfolio
- Customers are more likely to start as Solo Stove customers than branch out to Chubbies than vice-versa
- With Solo Stove’s focus on customer feedback about ways to add to the Solo Stove through accessories, 50% are repeat customers
- All the acquisitions that Solo Brands have done to expand the company have been at 7x-9x trailing EBITDA
- They own their supply chain with about 1 million square-feet of dedicated warehouse space
Ocean Freight Costs
Solo Brands products are contract manufactured in China, Vietnam and India. As noted in their earnings release last quarter, Covid impacts on manufacturing have hurt production of their products, notably the Solo Stove Pi. As a result of their overseas manufacturing, they have sensitivity to ocean freight costs to get their product to their warehouse facilities.
Solo Brands saw the expiration of their current ocean freight contracts on April 30th, 2022. To plan for that, they baked a 40% increase into their financial model for the year and also tried to ship as much as they could prior to expiration.
Just since the end of April, ocean freight is experiencing softening demand. While Solo Brands have new freight contracts, they’ve been using the spot market because it’s been cheaper than their contracted rates. They’ve seen spot rates decreasing and as a result, they’ve had some ocean freight companies come back and lower their contracted rate.
Solo Brands CEO, John Merris cautioned that it’s still very early to determine if the freight rate environment will continue. With a 40% increase in freight baked into their model though, an decrease in ocean freight costs would result in upside for Solo Brands.