Reed's, Inc. (NYSEMKT: REED) recently disclosed that Haggen Food & Pharmacy has allowed four flavors of Reed's Culture Club Kombucha in all of their thirty two Haggen Food and Top Food and Drug stores throughout Oregon and Washington. Over the last few months, the company has been expanding its Culture Club Kombucha in various markets. Prior to this announcement, it also confirmed that Ingles Markets, Incorporated (NASDAQ: IMKTA) has likewise authorized four flavors of Reed's Culture Club Kombucha in more than two hundred supermarket locations across the North and South Carolina. Founder and CEO Chris Reed said that these supermarkets have confirmed the company's brand strength in the functional juice and tea category. Hence, these aggressive expansions will enhance its brand leadership and influence in this emerging niche market. Reed's Culture Club Kombucha is also available in all Eagle, Kroger (NYSE: KR), Wegmans, and Jewel-Osco stores.
Third Quarter 2013 Results
Reed's announced that revenues increased by 28 percent to $10.1 million for the third quarter of fiscal year 2013. This is the first time that the company reached $10 million in quarterly sales. On a nine month basis, it posted revenues of $27.7 million, or an increase of 25 percent compared to the same period last year. Management attributed the results to the 18 percent increase in sales volume of its Reed's Culture Club Kombucha. As a result of the robust growth in sales volume, it secured a number two position in the national Kombucha sales. Given that it has completed its plant capital improvements in Los Angeles, the company expects to produce more output in the future. Mr. Reed said that the company has a strong mix of great brands that have performed well. He mentioned that its Kombucha is still in the early stages and the company expects to see significant sales over the next year. Going forward, the company plans to make strong in-roads into new distribution channels for its Reed's and Virgil's natural sodas.
Net income for the third quarter reached $34,000, compared to the net income of $22,000 posted in the previous year. Income from operations also reached $214,000 compared to the $183,000 in 2012. For the last twelve months, the company posted a net loss of $1.74 million, which translates to a negative operating cash flow of $504,000. However, investors should be assured of its future prospects noting that around 27 percent of its total capital is held by management. Peers such as Monster Beverage Corp. (NASDAQ: MNST) and Dr. Pepper Snapple Group (NYSE: DPS) are valued at double digit valuations between 15 times and 30 times earnings.
Year-to-date, shares of REED have gained more than 25 percent. In the end, investors would be better off waiting until the company posts a sustainable profit before investing in this consumer stock.