The Duckhorn Portfolio, Inc. (NYSE: NAPA), a leader in the luxury wine sector, has announced its financial results for the first quarter of fiscal year 2025, which ended on October 31, 2024. The company reported a robust performance, reflecting significant growth in key metrics, although some challenges impacted net sales and margins.
Financial Highlights
- Net Sales Growth:
Net sales reached $122.9 million, marking an impressive increase of $20.4 million, or 19.9%, compared to $102.5 million in the same quarter of the previous year. The growth was primarily driven by the addition of Sonoma-Cutrer to the portfolio. However, excluding Sonoma-Cutrer, net sales declined by $8.4 million, or 8.2%. This decline was attributed to one-time inventory transfers, as outgoing distributors in certain states moved unsold inventory to new distributors. - Gross Profit and Margins:
Gross profit increased by $7.6 million to $61.5 million, representing a 14.2% rise compared to the prior year. The gross profit margin was 50.0%, a decline of 250 basis points year-over-year due to higher costs. Adjusted gross profit, which reflects a more accurate picture of core performance, rose 19.8% to $63.8 million, with an adjusted gross profit margin of 51.9%, down slightly by 10 basis points. Excluding Sonoma-Cutrer, adjusted gross profit declined by $4.7 million, or 8.9%, with a gross profit margin of 51.6%. - Net Income:
The company reported a net income of $11.2 million, or $0.08 per diluted share, down from $15.5 million, or $0.13 per diluted share, in the prior year. However, adjusted net income increased to $23.8 million, or $0.16 per diluted share, compared to $17.2 million, or $0.14 per diluted share, reflecting improved profitability after adjustments. - Adjusted EBITDA:
Adjusted EBITDA surged 39.9% to $48.6 million, compared to $34.7 million in the prior year period. This growth was driven by increased net sales, particularly from the inclusion of Sonoma-Cutrer, and ongoing operational efficiencies. Adjusted EBITDA margin improved significantly, rising 560 basis points to 39.5%. - Leverage and Liquidity:
As of October 31, 2024, Duckhorn Portfolio had $5.4 million in cash and maintained a leverage ratio of 1.7x net debt to trailing 12 months adjusted EBITDA, demonstrating a strong financial position.
Operating Performance
Selling, General, and Administrative Expenses (SG&A):
Total SG&A expenses increased by $10.3 million to $40.8 million, a 33.8% rise year-over-year, driven by investments to support business growth and the integration of Sonoma-Cutrer. However, adjusted SG&A expenses grew modestly by 5.8% to $23.9 million, reflecting the company’s disciplined cost management. As a percentage of net sales, adjusted SG&A expenses decreased by 260 basis points, highlighting improved operating efficiency.
Strategic Initiatives
Deirdre Mahlan, Duckhorn’s President, CEO, and Chairperson, expressed optimism about the company’s performance and future prospects. “We are pleased to begin fiscal 2025 with strong financial performance. Our growth continues to outpace the industry as our teams remain focused on advancing our strategic initiatives,” said Mahlan. She emphasized the company’s commitment to leveraging its distinctive portfolio of brands, operational excellence, and market leadership to drive long-term growth and profitability.
Key Drivers and Challenges
While the integration of Sonoma-Cutrer significantly boosted sales and profitability, certain challenges, such as one-time inventory transfers and higher costs, affected overall margins. The decline in gross profit margin and net income on a GAAP basis underscores the impact of these factors. However, the company’s adjusted metrics demonstrate its underlying strength and ability to manage costs effectively.
The strategic acquisition of Sonoma-Cutrer has positioned Duckhorn Portfolio for sustained growth, allowing the company to diversify its offerings and expand its market share. By focusing on operational efficiencies and maintaining disciplined cost controls, Duckhorn has been able to improve adjusted profitability despite macroeconomic headwinds.
