Solo Stove’s parent company, Solo Brands, has had some rocky times recently. They haven’t released much innovation in the past year, they announced they were going through a strategic transition, and turned over their entire executive team.

Things got worse over the past few months and we got word of layoffs. This was followed up with their CEO stepping down from the company.

Solo Brands released their Q4 and 2024 full year earnings today, and they have major financial and strategic problems to quickly solve.

Change in Reporting

For this reporting period, Solo Brands changed how they report their business segments. Before they were all lumped together, but now there are two main segments, Solo Stove and Chubbies. In 2024, Solo Stove had revenue of $297.4 million compared to $112.7 million at Chubbies.

Changes in Going Concern

When Solo Brands released their earnings this morning, there was one notable change. They provided updated information about their going concern. For those not familiar, a going concern is essentially a statement by a company’s auditors that they will likely have enough money to pay their bills over the next year.

If we are unable to obtain additional financing, improve our results or liquidity or execute any operational improvements, we will be unable to continue to fund our operations, continue to sell our products, realize value from our assets, or discharge our liabilities in the normal course of business. If we become unable to continue as a going concern, we could have to liquidate our assets, and potentially realize significantly less than the values at which they are carried on our financial statements, and stockholders could lose all or part of their investment.

Solo Brands 10-K filing for 2024

Stock Cratered

Probably because of their possible issues with solvency, it was an unconventional earnings call today. They started off by saying that there wouldn’t be an analyst Q&A session on the call. That’s usually a staple of earnings call and it’s where analysts get their questions answered.

That certainly didn’t help their stock price for the day. It got crushed, and was down 63% on the day to $0.24. They already received a notice that they weren’t in compliance for the stock exchange with a price under $1. Today’s developments only hurt the prospect of curing their non-compliance.

Strategic Changes

Solo Brands laid out their plan to turn things around on the call.

To summarize, the company is resetting the organization’s cost structure, identifying the key performance drivers in our portfolio, revamping our marketing approach, overhauling our pricing and promotion strategies, accelerating and amplifying our new product launches and creating a metric-based culture to track performance in real time. Bottom-line, we have great brands and products with best-in-class reviews. We have the foundation.

John Larson – Interim CEO of Solo Brands

The cost structure that they currently have was made to support a larger, growing business. A turnaround model is much different. They are going through the line items on their income statement to identify areas that they can cut, without harming their turnaround prospects.

It’s a delicate balance because their other initiative is to create and release new products. Cutting expenses and focusing innovation can often run counter to each other.

Innovation is important to stem the bleeding of their revenue though. It’s a tough consumer environment, but consumers are still buying new products. Innovation also gives the opportunity to reset price.

On the expense side of their business they’ve already been working on reducing costs. Beyond the layoffs at the end of last year, they’ve also consolidated two distribution centers and are looking to sublease those facilities. They’ve also been renegotiating freight contacts since mid-2024.

The tipping point on their marketing spend seemed to be when they had the Snoop Dogg ad at the end of 2023. Despite the headwinds to their business in 2024, they doubled down on marketing campaigns like that and had another Snoop Dogg ad while they went back and forth on the value it brought. Marketing continues to be the largest expense on their income statement.

Tariffs Hurting their Business

One factor that ultimately could lead the bankruptcy for Solo Stove are the impacts of tariffs. The amount of tariffs and from where is a fluid situation and, with Solo Brand’s financial situation, they may not have the runway to mitigate.

In recent years, tariffs on goods manufactured in China have increased significantly. In addition, the U.S. presidential administration recently imposed an additional aggregate 20% tariffs on goods manufactured in China, 25% tariffs on all steel manufactured outside of the U.S. and 25% tariffs on almost all goods manufactured in Mexico and Canada. China, Canada and Mexico have retaliated or are expected to retaliate with tariffs on goods manufactured in, or exported by, the United States. During 2024, the majority of our products that were imported into the United States from China were already subject to tariffs that were as high as 25%, which adversely impacted our expenses. In addition, our product lines involve production with steel manufactured outside the U.S., including steel manufactured in Mexico that is subject to the new tariffs, including virtually all of our Solo Stove and TerraFlame brands’ products. Further, certain of our Solo Stove, Oru and TerraFlame brands’ products are produced in Mexico and are subject to the new tariffs on Mexico. These tariffs and retaliatory actions are expected to have a significant adverse effect on our results of operations and margins and sales of our products outside the U.S. Any strategies we implement to mitigate the impact of such tariffs or other trade actions may not be successful. In addition, there can be no assurances that we will be able to pass any increased costs from tariffs on to our customers, that demand or profitability will not be materially adversely impacted, or that we will be successful in implementing efforts to mitigate the effect of tariffs on our business. Sourcing materials from domestic suppliers and manufacturing vendors or transitioning production to the U.S. would be a costly and lengthy process with uncertain results.

Solo Brands 2024 10-K

The last sentence in the above statement is key to problem at hand regarding tariffs for Solo Stove. They’re losing money, their business is getting more expensive from tariffs, and they don’t have the time or cash to effectively do anything about it.