When fizzy-drink company Reed’s Inc. released its 2013 earnings earlier this year, shareholders found its performance flat and the stock sank.
But Chief Executive Chris Reed said that investors would soon “get religion.” And the company’s second quarter numbers last week might have answered any prayers.
Reed’s reported a big jump in revenues and profits, flipping the business from the red to the black.
Shares of the South L.A. soda company popped on the news, with the stock soaring 13 percent to close at $5.70 during the week ended Aug. 13. The company was one of the biggest gainers on the LABJ Stock Index. (See page 26.)
Reed’s spent a lot of money in 2013 developing its line of kombucha, a fermented black tea drink popular with the Whole Foods set. When the company released its annual earnings in March, investors balked at the amount of spending and shares dropped 26 percent in one day.
But with kombucha sales up 35 percent last quarter compared with the same quarter last year, the shareholders who stuck around are now drinking up.
It’s not just the kombucha business that’s been booming at Reed’s, though. Sales of Reed’s line of Virgil’s sodas increased 10 percent and Reed’s Ginger Brew jumped 34 percent compared with the same quarter last year.
“The main star was still Ginger Brew,” Reed told the Business Journal. “And that’s for no apparent reason other than people are just discovering it more and more.”
Reed’s reported net income of $633,000 (5 cents a share) for the three months ended June 30, compared with a net loss of $494,000 (-4 cents a share) for the same period a year earlier. Revenue grew to $11.2 million, up 18 percent from the comparable quarter last year.
Reed said that the second quarter was strong relative to the first partly because of the weather. A harsh winter across much of the country had depressed demand for cold drinks.
“The weather in the first quarter was brutal for beverage companies,” he said.
Reed said that the second half of the year will only get better, as the company has signed distribution deals with national retailers such as Food Lion in Salisbury, N.C., and Books-A-Million Inc. in Birmingham, Ala. Reed’s also recently launched its first national TV ad campaign, which Reed expects will drive sales higher in the second half of the year.
Joseph Munda, an analyst who covers Reed’s for New York investment bank Sidoti & Co., is bullish on the soft-drink maker. After the earnings were released, he raised his rating on the company to “buy” with a price target of $8 a share.
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