Solo Stove and their parent company Solo Brands saw their growth rocket into the Pandemic. They were a DTC success story that was focused primarily on growing the business.
This year, it’s been a very different story with the company. They obviously still want some growth, but it’s no longer the dominant focus. Just listening to their earnings call they’re focused on preserving cash, and shrinking the business to match their new topline.
We are focused on profitability first and building a cost structure to match current demand. We’re simplifying the organization, taking permanent costs out and holding the line on marketing efficiency. SG&A declined 35.4% year-over-year in Q3. That discipline is not a onetime action. It’s how we operate.
John Larson, President and CEO of Solo Brands
Cash discipline is equally central. We ended the quarter with $16.3 million in cash and cash equivalents, no outstanding borrowings on our revolver and inventories down 21% year-over-year. Across Q2 and Q3 combined, we generated $22 million in operating cash flow. Liquidity is stable, and we’re allocating capital with care.
You can tell from the liquidity focus that it’s a business that ran into some financial troubles and is working their way back. While they try to shrink the expense side of their business, they’re still contending with headwinds that all outdoor retailers are facing.
Beyond a stretched consumer, and added headwind for Solo Stove is their retail partners had too much inventory. Solo Stove’s revenue was down significantly on the quarter because they weren’t selling into retailers.
Within our Solo Stove segment, net sales were $30.8 million, down 48.1% from the prior year. The decline was driven primarily by retail partners continuing to manage through elevated on-hand inventory. While retail sell-in remained soft, sell-through trends were more stable.
Laura Coffey, CFO of Solo Brands
They also ran into troubles with their retail partners when they were delisted from the stock exchange. They’ve managed through curing their deficiencies, and are relisted, but some of that lingering uncertainty remains in their retail relationships.
On Solo Stove retail, the uncertainty in delisting earlier this year clearly set us back with some partners. We are rebuilding confidence the right way, partnering with integrity and providing the coordinated framework to win together.
John Larson, President and CEO of Solo Brands
Innovation Focus
Another positive for Solo Stove is they got back to releasing new products again this year. They are seeing early positive signs with their new propane fire pit, and their new Summit 24 smokeless wood fire pit.
I can tell you that we have increased orders from our partners in terms of building some more opportunity for sales here in the fourth quarter. What is really encouraging is we’re bringing a lot of new customers into the category. More than 70% of the customers are new to us who are buying these products. And in particular, the Infinity Flame, the #1 state for sales is California right now.
John Larson, President and CEO of Solo Brands
And given California generally has some fire bans, et cetera, as you know, wood burning isn’t big there, but it’s now the #1 state that we’re selling in with Infinity Flame. As we look across the country, we’re moving into other markets that we didn’t participate in as heavily before. So we’re very encouraged by the initial results.