When an Earnings Release Falls Flat
National Beverage’s latest earnings release is a textbook case on what not to say in a public forum
It was, by all standards, one of the more bizarre, eyebrow-raising mea culpas seen in a formal quarterly earnings-related press release: A CEO blaming “injustice” for his company’s dismal financial results.
While refreshing in their honest if not bizarre nature, National Beverage CEO Nick Caporella’s comments related to poor sales of his company’s trendy La Croix fizzy beverage drinks, which he earnestly and sincerely apologized to the company’s shareholders for.
What to say
Make no mistake: Being honest and upfront with shareholders and the public is absolutely the way to go when it comes to corporate and financial communications. To this day, the number of earnings releases sent out to the public that contain buried key metrics or inaccurate and contradictory statements is nothing short of confounding.
Yet there is a not-so-subtle line between reporting information about a public company in a clear and concise way, and squarely placing blame on something as esoteric and, dare it be said, crazy, as “injustice.”
To be sure, National Beverage’s most recent quarterly numbers were accurate. In a nutshell, the company spent too much and sold too little – resulting in net earnings that didn’t add up to what analysts and other market-watchers were expecting to see.
What not to say
What leaped off the accompanying page that detailed the company’s quarterly numbers was Caporella’s literal rantings and ramblings about why.
Said Caporella: "Managing a brand is not so different from caring for someone who becomes handicapped. Brands do not see or hear, so they are at the mercy of their owners or care providers who must preserve the dignity and special character that the brand exemplifies.
"One can be induced to purchase by cheapening price or giving away a product, but falling in love with a feeling of joy is the result of contentment. Just ask any LaCroix consumer ... Would you trade away that LaLa feeling? 'No way, they shout - We just love our LaCroix!' I am positive they respond this way each and every time."
It doesn’t take a rocket scientist or public relations professional much to figure out that these comments are a little wonky. They simply do not belong in the public realm, let alone the realm of formal quarterly filings that include performance and views to shareholders.
Indeed, a quarterly earnings report is a formal filing made by public companies to report their performance. Earnings reports include items such as net income, earnings per share, earnings from continuing operations and net sales.
A quarterly earnings report by an American company is generally backed up by a company's so-called Form 10Q, a legal document that must be filed with the U.S. Securities and Exchange Commission every quarter.
The same holds for companies in other countries: Generally, the report and accompanying press release is meant to advise both regulators and investors.
Which of course begs the question: Why would any CEO of a publicly traded company publish, in black and white, inarticulate ramblings related to their company’s financial performance?
The answer is subjective. The conclusion, however, is not
“Negligence nor mismanagement nor woeful acts of God” may not have been the reasons behind the company’s 40% drop in earnings, according to Mr. Caporella, but something was.
Articulating that in clear, concise, professional language that appropriately balances regulatory reporting requirements, investor and stakeholder communications and public understanding generally goes a lot farther than blaming “injustice.”