NEW YORK — On Aug. 11, Better Choice Company revealed its second quarter financial results for fiscal 2022. Despite supply chain disruptions and inflationary price increases, the company detailed a record-breaking quarter due to significant increases in brick-and-mortar and international sales.
Second quarter gross sales for the company increased to $19.8 million. Net sales increased to $16.5 million in the second quarter, representing a quarter-over-quarter increase of 50% driven largely by a 133% increase in brick-and-mortar sales and a 75% increase in international sales for the company. Gross margin over the quarter was 29%, up from 28% in the first quarter of 2022.
“In spite of unprecedented supply chain disruptions felt across the consumer-packaged goods industry, during the second quarter of 2022 we were able to deliver sequential adjusted gross margin improvement of approximately 300 basis points,” said Scott Lerner, chief executive officer of Better Choice.
The company also reported record gross sales for the first half of 2022 at $39.5 million and net sales of $33.5 million, a year-over-year increase of about 54%.
According to the company, the significant sales growth can be attributed to many expansions, including the launch of pet food line Halo Elevate throughout several pet retail locations. The distribution of Halo Elevate represented about $3.7 million in gross sales for the second quarter.
“We have already launched Halo Elevate in over 1,500 pet specialty stores including Petco, Pet Supplies Plus and key independent retailers, and have observed consistent week-over-week growth of POS sales, coupled with strong repeat customer purchase rates at key accounts,” Lerner said.
In addition to launching Halo Elevate, Better Choice also completed its integration of the TruDog brand, expanding its freeze-dried raw meals, toppers and treat portfolio; launched several global marketing campaigns targeting pet specialty; and introduced price increases in April 2022 to combat inflationary pressures and supply chain distributions in domestic and international markets.
Better Choice also transitioned to a new co-manufacturer for several of its international pet food products.
“In the second half of 2022, we expect to realize continued gross margin improvements, driven primarily by the transition of our international dry kibble diets to a new co-manufacturer,” Lerner said. “This transition was completed in mid-June and resulted in an immediate 1,500 to 2,000 basis point improvement to gross margin. Prior to the transition, these diets represented approximately $10 million of net sales in the first half of 2022 [about 70% of total international sales].”
Internationally, Better Choice achieved $7.1 million in second quarter sales, up 75% from 2021. The growth was driven by the Asian market, specifically for dry cat food, as well as new market potential in Australia and Mexico.
“While we still expect that second half international sales will be strong, it is likely Q2 will be our largest international quarter this year,” Lerner added during the company’s second quarter 2022 earnings call.
Though Better Choice witnessed growth in brick-and-mortar and international sales, Lerner detailed that e-commerce and direct-to-consumer (DTC) sales performed lower than anticipated. E-commerce sales in the second quarter increased 28% compared to year-ago, and have increased 8% year-to-date. Better Choice attributed the small growth to a variety of factors, including low inventory experienced by its e-commerce partners, like Amazon.
With significant success in the second quarter, Better Choice anticipates fiscal year 2023 gross sales of at least $100 million, supported by its three-year innovation plans and expansions.
“We also have a lot of exciting new developments planned, including the continued distribution of Halo Elevate nationwide and the rebrand of Halo Holistic and Trudog,” Lerner said. “While we are very excited by our sales growth in the first half of this year, we remain laser focused on driving continued margin improvements across our portfolio.”
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