Willamette Valley Vineyards Posts Results for Q2 2024

Rhea-AI Summary

Willamette Valley Vineyards (NASDAQ: WVVI) reported Q2 2024 results, showing a slight improvement in loss per common share after preferred dividends, decreasing from $0.08 to $0.07 compared to Q2 2023. Sales revenue decreased by 3.7% to $10,332,358, primarily due to lower distributor sales, partially offset by increased direct sales from a new tasting room. Gross profit margin improved by 4.3 percentage points to 62.6%, driven by higher product prices. Net income increased by 80.7% to $195,978, mainly due to higher pricing. The company faces challenges from changing market conditions, including reduced wine inventories and shelf space reallocation by wholesalers and retailers.

Positive

• Gross profit margin improved by 4.3 percentage points to 62.6%
• Net income increased by 80.7% to $195,978
• Direct sales to consumers increased by $203,174
• Selling, general and administrative expenses decreased slightly by 0.1%

Negative

• Sales revenue decreased by 3.7% to $10,332,358
• Sales through distributors decreased by $597,059
• Challenging market conditions with reduced wine inventories and shelf space reallocation

Insights

Financial Analyst

Willamette Valley Vineyards' Q2 2024 results present a mixed picture. While net income increased by 80.7% year-over-year, this was primarily due to higher product pricing rather than volume growth. The 3.7% decrease in sales revenue is concerning, particularly the 5.6% drop in distributor sales. This suggests challenges in the wholesale market, possibly due to changing consumer preferences and retailer strategies.

The improvement in gross profit margin to 62.6% is positive, but it's important to monitor whether this can be sustained without impacting sales volume. The company's strategy to focus on direct-to-consumer sales through new tasting rooms could help offset wholesale challenges, but it's a capital-intensive approach that may take time to yield significant results.

Market Research Analyst

The wine industry is facing significant headwinds, as evidenced by Willamette Valley Vineyards' results. Retailers reducing wine inventories and reallocating shelf space to alternative alcoholic beverages signals a shift in consumer preferences. This trend, coupled with the emphasis on contract house wine brands for better margins, poses a substantial threat to established wineries.

The company's strategy to increase direct contact with consumers through wine, culinary and hospitality experiences is a smart move. However, it's competing in an increasingly crowded experiential market. The success of this approach will depend on creating unique, compelling offerings that resonate with wine enthusiasts and justify premium pricing. The company's diverse wine enthusiast ownership could be a valuable asset in this endeavor, potentially serving as brand ambassadors and a loyal customer base.

SALEM, Ore., Aug. 13, 2024 /PRNewswire/ -- Willamette Valley Vineyards, Inc. (NASDAQ: WVVI) (the "Company"), a leading Oregon producer of Pinot Noir, generated a loss per common share after preferred dividends of $0.07 and  $0.08 for the three months ended June 30, 2024 and 2023 respectively, a decrease of $0.01, for the three month period ended June 30, 2024 over the same three month period in the prior year. 

Sales revenue for the three months ended June 30, 2024 and 2023 were $10,332,358 and $10,726,243, respectively, a decrease of $393,885, or 3.7%, in the current year period over the prior year period. This decrease was caused by a decrease in sales through distributors of $597,059 partly offset by an increase in direct sales of $203,174 in the current year three-month period over the prior year period. The decrease in revenue from sales through distributors was primarily related to lower case sales in this market. The increase in direct sales to consumers was primarily the result of opening a new tasting room in late 2023.

Gross profit as a percentage of net sales for the three months ended June 30, 2024 and 2023 was 62.6% and 58.3%, respectively, an increase of 4.3 percentage points in the current year period over the prior year period, mostly as a result of higher prices charged for products compared to the same quarter of 2023.

Selling, general and administrative expenses for the three months ended June 30, 2024 and 2023 was $5,934,784 and $5,941,739 respectively, a decrease of $6,955, or 0.1%, in the current quarter over the same quarter in the prior year. This decrease was primarily the result of a decrease in selling and marketing expenses of $11,872, or 0.3% being partially offset by an increase in general and administrative expenses of $4,917, or 0.3% in the current quarter compared to the same quarter last year.

Net income for the three months ended June 30, 2024 and 2023 was $195,978 and $108,453, respectively, an increase of $87,525, or 80.7%, in the second quarter of 2024 over the same quarter in the prior year. The increase in net income for the second quarter of 2024, compared to the comparable period in 2023, was primarily the result of higher prices for products sold in 2024.

Jim Bernau, Founder and CEO said, "The Company is facing a rapidly changing market that we believe is influenced by interest costs, inflation and consumer trends. We have seen wholesalers and retailers reducing their wine inventories and reallocating their shelf space for alternative alcoholic beverages.  We are also seeing retailers emphasize contract house wine brands in an effort to capture greater retail margins.  We are hoping to address these challenges by increasing our direct contact with wine consumers, offering wine, culinary and hospitality experiences through our ten locations and increasing our interaction with our diverse wine enthusiast ownership.  We believe our efforts will produce positive financial results in both our wholesale and retail parts of our business."

For a complete discussion of the Company's financial condition and operating results for the second quarter, see our Form 10-Q for the three months ended June 30, 2024, as filed with the United States Securities and Exchange Commission on EDGAR. 

Willamette Valley Vineyards, Inc. is headquartered at its Estate Vineyard near Salem, Oregon.  The Company's common stock is traded on NASDAQ (WVVI).

This press release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, referred to as the "Securities Act", and Section 21E of the Securities Exchange Act of 1934, as amended, referred to as the "Exchange Act". These forward-looking statements involve risks and uncertainties that are based on current expectations, estimates and projections about the Company's business, and beliefs and assumptions made by management. Words such as "expects," "anticipates," "intends," "plans," "believes," "seeks," "estimates", "predicts," "potential," "should," or "will" or the negative thereof and variations of such words and similar expressions are intended to identify such forward-looking statements. Therefore, actual outcomes and results may differ materially from what is expressed or forecasted in such forward-looking statements due to numerous factors, including, but not limited to: availability of financing for growth, availability of adequate supply of high quality grapes, successful performance of internal operations, impact of competition, changes in wine broker or distributor relations or performance, impact of possible adverse weather conditions, impact of reduction in grape quality or supply due to disease or smoke from forest fires, changes in consumer spending, the reduction in consumer demand for premium wines, and the revenues or costs for any of our tasting rooms and restaurants exceeding our expectations. In addition, such statements could be affected by general industry and market conditions and growth rates, and general domestic economic conditions.

Many of these risks as well as other risks that may have a material adverse impact on our operations and business, are identified in Item 1A "Risk Factors" in our Annual Report on Form 10-K. 

The following is the Company's Statement of Operations for the three months and six months ended June, 30, 2024 compared to the three and six months ended June 30, 2023:

					Three months ended				Six months ended
					June 30,				June 30,
					2024		2023		2024		2023
SALES, NET					$       10,332,358		$       10,726,243		$       19,135,438		$       19,035,183
COST OF SALES					3,860,668		4,475,665		7,391,026		8,306,142
GROSS PROFIT					6,471,690		6,250,578		11,744,412		10,729,041
OPERATING EXPENSES
	Sales and marketing				4,338,171		4,350,043		8,365,953		8,333,623
	General and administrative				1,596,613		1,591,696		3,444,130		3,061,529
		Total operating expenses			5,934,784		5,941,739		11,810,083		11,395,152
INCOME (LOSS) FROM OPERATIONS					536,906		308,839		(65,671)		(666,111)
OTHER INCOME (EXPENSE)
	Interest expense, net				(263,694)		(164,610)		(493,381)		(289,032)
	Other income, net				2,541		5,135		100,593		78,721
INCOME (LOSS) BEFORE INCOME TAXES					275,753		149,364		(458,459)		(876,422)
INCOME TAX (EXPENSE) BENEFIT					(79,775)		(40,911)		132,632		240,052
NET INCOME (LOSS)					195,978		108,453		(325,827)		(636,370)
Accrued preferred stock dividends					(563,249)		(511,720)		(1,126,426)		(1,023,439)
LOSS APPLICABLE TO COMMON SHAREHOLDERS					$           (367,271)		$        (403,267)		$        (1,452,253)		$        (1,659,809)
Loss per common share after preferred dividends,
	basic and diluted				$                 (0.07)		$                 (0.08)		$                 (0.29)		$                 (0.33)
Weighted-average number of
	common shares outstanding, basic and diluted				4,964,529		4,964,529		4,964,529		4,964,529

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SOURCE Willamette Valley Vineyards

FAQ

What was Willamette Valley Vineyards' (WVVI) loss per common share in Q2 2024?

Willamette Valley Vineyards (WVVI) reported a loss per common share after preferred dividends of $0.07 in Q2 2024, compared to $0.08 in Q2 2023.

How did WVVI's sales revenue change in Q2 2024 compared to Q2 2023?

WVVI's sales revenue decreased by 3.7% to $10,332,358 in Q2 2024, compared to $10,726,243 in Q2 2023.

What was the main reason for WVVI's increased net income in Q2 2024?

The main reason for WVVI's increased net income in Q2 2024 was higher prices for products sold compared to the same period in 2023.

How is Willamette Valley Vineyards (WVVI) addressing market challenges?

WVVI is addressing market challenges by increasing direct contact with wine consumers, offering wine, culinary, and hospitality experiences through ten locations, and increasing interaction with their diverse wine enthusiast ownership.