Green Mountain Coffee Roasters Inc. slashed its full-year sales forecast after demand for its K-Cup coffee refills fell well short of Wall Street expectations, sending its stock crashing 40 percent.
The maker of the popular one-cup Keurig coffee brewers said sales of K-Cups rose 59 percent in the second quarter, though this represented a sharp fall from the 115 percent growth seen in the previous quarter.
"After several quarters of robust adoption, we now expect a more moderated growth trajectory going forward for both Keurig brewer and K-Cup pack sales," CEO Lawrence Blanford said in a statement.
The company has been facing increasing competition in single-cup coffee from companies with more financial muscle like Starbucks Corp, Nestle SA and Wal-Mart Stores Inc.
Green Mountain earns a majority of its profits from K-Cups as it sells the brewers at cost. A sharp deceleration in the growth of K-Cup sales pressures the company's margins.
Gross margins in the second quarter declined to 35.4 percent from 37.5 percent in the year-ago period.
The company reported a second-quarter profit of $93.3 million, or 58 cents a share, compared with $65.8 million, or 44 cents a share, a year ago.
Net sales rose 37 percent to $885.1 million, but missed estimates of $971.7 million, according to Thomson Reuters I/B/E/S.
Green Mountain sees fiscal 2012 sales rising 45 percent to 50 percent, much lower than its previous forecast of a rise of 60 percent to 65 percent.
Shares of the company were down $19.91 at $29.61 in extended trade.
The stock attracts a lot of interest from short sellers, especially after hedge fund manager David Einhorn questioned the company's accounting practices and growth prospects last year.
© 2013 Thomson/Reuters. All rights reserved.