Boston Beer’s $216 Million Legal Hangover Overshadows Q1 Results

Boston Beer posts $13.88 GAAP loss per share from Ardagh legal dispute, but adjusted earnings hit $1.64. Revenue falls 4.4% as Truly seltzer fades, while Twisted Tea and Sun Cruiser gain traction.

Boston Beer is nursing a painful financial headache. A costly legal dispute with supplier Ardagh Metal Packaging has saddled the company with a $216 million charge, dragging its bottom line deep into the red and sending shares down more than 8% in Thursday trading.

The one-time hit translated into a loss of $13.88 per share under GAAP standards. Strip out that extraordinary item, however, and the picture brightens considerably: adjusted earnings came in at $1.64 per share. The legal battle marks a stark contrast to the prior year, when the brewer reported a profit of $1.64 per share on a comparable basis.

Revenue for the first quarter slipped 4.4% to roughly $434 million, narrowly missing analyst forecasts. The top-line weakness stemmed from a nearly 7% decline in shipment volumes, with flagship brands Truly and Samuel Adams bearing the brunt of the slowdown. Truly continues to lose ground in the hard seltzer category, though the company sees brighter spots elsewhere.

Twisted Tea and the newly launched Sun Cruiser cocktail are gaining traction in the premium segment. Sun Cruiser, a ready-to-drink offering, has already cracked the top five in its category, and management is betting big on its summer appeal. To prop up sales and offset the seltzer slump, Boston Beer plans to boost advertising and marketing spending by up to $40 million this year.

On the cost front, the company managed to expand its gross margin by 100 basis points to 49.3%, thanks to more efficient production and lower input prices. That operational discipline provides some cushion as the brewer navigates a shifting landscape. Hard seltzers are fading in popularity, but brands like Angry Orchard and Dogfish Head have posted growth for four consecutive quarters.

The outlook remains cautious. Boston Beer now forecasts full-year earnings in a range of $8.50 to $10.50 per share, with potential tariff costs of up to $30 million looming over the remainder of the year. Management is standing by its volume guidance, expecting only a modest decline in shipments for 2024.

Share buybacks continued in the first quarter, with $31.2 million deployed to repurchase stock. The company still has $197 million remaining under its authorized buyback program. Executives are scheduled to meet with analysts in May to discuss how they plan to deploy that capital.

Technically, the stock is under pressure. Trading at around $185, the shares sit well below their 50-day moving average, and the relative strength index of 33.6 points to an oversold condition. The summer selling season will likely determine whether Boston Beer can shake off its legal hangover and regain investor confidence.