Traeger and Weber are facing a 'deflationary' grill replenishment rate: Analyst
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slashing its full year guidance
Traeger and Weber are facing a 'deflationary' grill replenishment rate: Analyst
- -7.20%
- -8.85%
As consumers shift their spending away from grills, outdoor cooking companies Traeger and Weber are slashing their sales outlooks and initiating inventory control measures.
Weber announced a cost management plan which included a ‘tightening of global inventory levels’ in its third-quarter earnings release, which mirrored the ‘actions to reduce inventory levels’ that Traeger shared publicly just days prior.
According to BMO Analyst Simon Siegel, it's the grill replenishment rate — how often stores restock items as they're sold — that's causing problems for the barbecue behemoths.
"If you have a short replenishment cycle, if you're a box of cereal or gas, you're very inflationary because it doesn't matter how much gas you bought last year, doesn't matter how much cereal you ate last year, you need to eat more," Siegel explained on Yahoo Finance Live (video above). "The longer your replenishment cycle — whether you have three-wick candles from Bath Body Works, whether you have sneakers from Nike or Under Armour, whether you have a Peloton bike or a grill or whether you have a home — the longer the replenishment, the more deflationary I think it's going to become."
During the coronavirus pandemic, demand was pulled forward, and consumers increased their spending on household goods from home electronics and appliances to mowers and grills.
However, the countercyclical retail demand experienced during 2020 and 2021 disrupted the sales pipeline among end consumers and channel partners. As sales for discretionary items like grills started to slow, retailers — such as Walmart, Target, Lowe's and Home Depot — have become less inclined to renew orders for inventory.
That means grill manufacturers will need to lean into other lines of business to offset sales headwinds. For instance, Traeger has sought to bring in revenue by selling fuel pellets in addition to the grills themselves.
"As long as we're still grilling, it doesn't matter if you don't buy another grill, there is another attachment rate," Siegel said of Traeger's pellet sales. "But to believe that you're going to fight a volume that shouldn't be there in the first place right now I think is dangerous."
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