Celsius Holdings (NASDAQ: CELH) experienced a sharp decline in early trading on Thursday, with shares falling approximately 17% to $24.17 in premarket activity. The drop followed the company's second-quarter earnings report, which revealed that revenue and adjusted earnings fell short of Wall Street expectations.
The headline numbers painted a mixed picture. Total revenue climbed to $817.9 million, a 10.6% increase year-over-year, but this growth was largely fueled by the acquisition of Rockstar Energy. Without the contribution from Rockstar, the company's overall sales grew by just 1.6% to an estimated $751.4 million. Rockstar accounted for about 85% of the reported revenue increase, contributing $66.5 million of the $78.7 million total boost.
Core brand performance was notably weaker. Revenue from the CELSIUS brand dropped 11.7% to approximately $387.0 million, and tracked retail sales in the U.S. fell by 2%. This decline was more pronounced than the retail sales data suggested, indicating a 9.7 percentage point gap between shipments and consumer takeaway. This discrepancy may reflect inventory adjustments and distribution changes rather than a fundamental shift in consumer demand, but it does not yet signal a recovery.
Profitability Pressures
Profitability declined at a steeper rate than sales. Adjusted EBITDA fell 12% to $184.2 million, while attributable net income dropped 57% to $36.4 million. Gross margin contracted to 48.1% from 51.5% in the prior-year period, impacted by increased promotional activity, a shift in product mix, and higher aluminum costs.
Adjusted earnings per share came in at $0.36, missing the published consensus estimate of $0.42 to $0.43. Revenue also fell short of the $870.1 million to $887.7 million range analysts had projected.
Portfolio Dynamics
The company's portfolio showed divergent trends. Alani Nu, which now accounts for 44.6% of total revenue, posted a 21% increase in revenue to $364.4 million, with U.S. retail sales surging 55.7%. Its market share rose to 8.7%. In contrast, Rockstar's U.S. retail sales declined by 13%, and its market share was just 1.9%.
CEO John Fieldly emphasized the company's focus on "return brand CELSIUS to sustainable growth." Management is pruning underperforming products and reallocating shelf space to faster-moving items. Efficiency metrics improved, with sales per distribution point up 16% sequentially, even as total distribution points fell by about 7%.
Analyst Reactions
Several analysts had already adjusted their price targets before the earnings release. Deutsche Bank's Steve Powers lowered his target to $39 from $44 on August 3, while JPMorgan cut its target to $56 from $70 on July 30. Stifel's Matthew Smith reduced his target to $45 from $62 on July 16, and Citigroup's Filippo Falorni moved his to $50 from $60 on July 14. The pre-report consensus was a Buy rating with a mean price target of $54.33, which is now likely to be revised downward as analysts update their models.
Outlook and Risks
The key question for investors is whether management can convert improved shelf efficiency into lasting, broader cooler presence without resorting to costly promotions. Risks include ongoing declines at CELSIUS and Rockstar, which could trigger more promotional spending, and inflationary pressures on aluminum and slower shelf expansion that may hinder margin recovery. On the upside, accelerating the conversion of productivity gains could provide a significant boost.
Nasdaq's regular trading session begins at 9:30 AM EDT. The premarket price is an early indicator and may be updated following the management earnings call and the opening auction.
