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Beyond Meat is in “survival mode” with a “going concern” risk possible for the plant-based pioneer due to deteriorating trends in its business and negative cash flow, according to a TD Cowen report.
The California company recently reported negative sales growth for the sixth quarter in a row, the analyst report said, noting that it doesn’t look like the troubles at Beyond Meat will subside any time soon.
Analysts with TD Cowen pointed to several troubling signs for Beyond Meat, including a loss of market share in plant-based meat, struggles to attract and retain consumers despite efforts such as lower pricing and more promotions, rising debt and declining sales.
CEO Ethan Brown told analysts, last week, that Beyond Meat is considering exiting certain product lines in the U.S. The company has been fighting challenges within the plant-based sector, including confusion around products over whether they are nutritious or not, and what they are made of, and consumers cutting back on spending within the pricey category.
Mounting challenges in plant-based meat
Last week, Brown issued a dire outlook for Beyond Meat. While he said there were pockets of strength for the firm, Brown said he was “disappointed” by Beyond Meat’s results in the most recent period and that he expects “current headwinds to persist in the coming quarters.”
With challenges surrounding its business unlikely to abate anytime soon, TD Cowen and other analysts are painting an increasingly pessimistic future for Beyond Meat.
“We believe that the company's deteriorating financial situation and weak category consumption presents ‘going concern’ risk for investors,” the TD Cowen report said.
Issued by a company’s management or auditors — or both — a ‘going concern’ risk means that a business may not have the cash to pay its obligations during the next year.
Ahead of its earnings report last week, Beyond Meat cut its annual revenue outlook for the second time this year and announced plans to lay off about 19% of its workforce. Brown also outlined a five-step plan to bring the company back to growth.
In addition to lowering headcount, the company will review its pricing strategy, look to reduce working capital and focus on geographies and markets that are exhibiting revenue growth. TD Cowen said Beyond Meat will likely prioritize its faster-growing European market, while exiting some product lines like jerky in the U.S. and possibly leaving China altogether.