Keurig to make cuts after declining sales

The Kold machine so far has proved costly for Keurig, with chief executive Brian Kelley telling analysts on a conference call on Tuesday that the company will invest more than $100 million in its development this fiscal year. The disclosure for this purchase can be found here.

The company expects to take $30 million to $35 million in pretax charges associated with the job cuts.

The negative consumer reception to Keurig 2.0 and the Mini recall created a “negative feedback loop”, the Goldman analysts noted. The company’s revenue came in at $970M, compared with the consensus outlook of $1B.

The stakes couldn’t be higher for Keurig Green Mountain, which stumbled with Keurig 2.0 coffee machines after consumers discovered the devices use a scanner to lock out coffee pods made by other brands.

Why it’s happening: Keurig gets most of its sales from coffee pods, and revenue declines in that arena were relatively limited at just 1%. Even with a new $1 billion stock buyback authorization and cost-cutting measures that could include layoffs of 5% of its workforce, Keurig Green Mountain has investors nervous about whether it can regain its former growth-stock glory.

Several other analysts also recently commented on the company. They downgraded the stock to “neutral” and removed the stock from Goldman’s “Americas Buy List”.

Keurig is a publicly traded company on NASDAQ under the ticker GMCR. SunTrust dropped their price objective on Keurig Green Mountain from $70.00 to $60.00 in a research note on Thursday. Keurig Green Mountain, Inc.

PRICE ACTION: In early trading, Keurig Green Mountain tumbled 28% to $53.70. The company saw sales fall 5%, and although adjusted earnings beat investor expectations by a penny per share, Keurig once again cut its guidance for the full 2015 fiscal year amid particular weakness in sales of its brewers and accessories. The Organization also offers traditional whole bean and ground coffee in other package types including fractional packages, bags and cans. “However, we believe the stock’s reaction has been overdone and incorrectly implies that Hot platform earnings power has peaked (saturation in brewer penetration, flattening of portion pack growth, mass exodus of customers and owned brand share loss) and that the Kold platform will be significantly dilutive to earnings”. The Company distributes its products in two channels: at-home (AH) and away-from-home (AFH).