The Boston Beer Company, Inc.

Boston Beer reported second-quarter revenue down 3.3% year over year, depletions down 6%, shipments down 4.5%, and gross margin of 50.4%, up 60 basis points from last year. Excluding litigation-related items, non-GAAP EPS was $3.65; management said the litigation expense adjustment created a $1.31 favorable impact to second-quarter GAAP EPS and a $14.27 unfavorable impact to year-to-date GAAP EPS. For the full year, the company maintained volume guidance of down low-single digits to down mid-single digits, raised the low end of gross margin guidance to 48.5% to 50%, kept non-GAAP EPS guidance at $8.50 to $10.50, and lowered advertising/promo/selling expense guidance to flat to up $20 million versus last year.

Jim Koch said the category is still under pressure, but the mix is improving modestly, with beer down and beyond beer outperforming traditional beer, and RTD spirits like Sun Cruiser standing out. He emphasized that Boston Beer is focusing on category-leading brands, innovation, and gross margin expansion, while being more disciplined with advertising after cutting lower-performing spend by $20 million. His tone was cautious but constructive, stressing that the company is managing through a difficult demand environment while trying to improve share and momentum in the second half.

Diego Reynoso said lower volume drove the 3.3% revenue decline, partially offset by price increases and favorable mix, and that gross margin improved to 50.4% thanks to brewery efficiencies, procurement savings, favorable mix and price. He noted advertising, promotional and selling expenses rose $26.2 million, freight costs increased $8.6 million, and G&A rose $3.1 million, including $1.4 million of legal fees tied to the supplier dispute. He also highlighted cash of $266 million, $150 million of credit line availability, capex guidance of $60 million to $80 million, and share repurchases of $48.5 million in the first 26 weeks plus $5.6 million through July 17, with about $174 million remaining on the repurchase authorization.

Analysts pressed on category volatility, event-driven demand from the World Cup and America 250, the risk to full-year depletions, shipment cadence in the back half, and whether heavier ad spending was working. Management said events helped materially in on-premise but only for a small slice of the business, and that Q3/Q4 shipment patterns are being affected by prior supply-chain changes, easier Twisted Tea comps, and innovation launches. On advertising, management said the cuts were concentrated in low-performing media, mainly Truly, and that the company still expects some back-half spend increase versus last year.