Sonos’ recently introduced high-end speaker, the Five, is one of the items driving a mix toward higher-margin device sales.


Sonos

Consumers continue to spend on items to spruce up their homes as the pandemic wears on, and that helped Sonos Inc. top sales expectations for the September quarter.

The maker of smart speakers and other audio electronics for the home reported Wednesday that it saw revenue of $339.8 million for the September period, Sonos’
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fiscal fourth quarter. That was up from $294.2 million a year earlier and ahead of the $299 million that analysts surveyed by FactSet had been predicting.

The stock was up about 20% in after-hours trading.

The company saw 67% growth in its direct-to-consumer business, helping to offset weaknesses at traditional retail partners due to the pandemic’s impact on in-person shopping. Sonos also disclosed in its shareholder letter that it had “no promotions” compared to the period from a year ago.

Chief Executive Patrick Spence said that the sales growth was validation of the company’s strategy to both seek out new customers and focus on getting existing customers to add additional products to their homes. The direct-to-consumer strategy works especially well with return customers, he told MarketWatch, since Sonos has an easy time reaching those customers and they’re more willing to go directly to a company rather than buying off marketplaces like Amazon.com Inc.
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The direct-to-consumer strategy is one reason why Sonos saw improving profit performance in the September quarter, according to Spence. The company posted net income of $18.4 million, whereas it recorded a $29.6 million net loss a year earlier. On a per-share basis, Sonos earned 15 cents in the quarter, above the FactSet consensus, which called for 2 cents. Sonos posted a 28-cent loss per share in the year-prior period.

See also: Sonos launches paid radio tier in expansion of services offerings

Other factors contributing to the improved margins included a greater sales mix of newer and more profitable products, including the company’s Arc premium sounder and its high-end Five speaker, Spence said. People have been buying new and larger TVs during their extended time at home, leading to demand for the Arc, which improves the sound experience for television sets. Spence also called out the company’s supply-chain diversification efforts through a move to Malaysia.

Though Sonos still faces some supply constraints, a source of concern following the company’s last earnings report, Spence said that the company is on “better footing” than before, having caught up on some products while continuing to see demand outstrip supply for the Arc soundbar and Amp amplifier.

For the 2021 fiscal year that just began, Sonos expects revenue of $1.44 billion to $1.5 billion, whereas the FactSet consensus was for $1.285 billion. Spence said that while Sonos hasn’t seen the dramatically “spikey” growth of some other pandemic beneficiaries, the business model remains resilient, leading to what he called “pretty bullish guidance for the year.”

Sonos shares have gained 18% over the past three months as the S&P 500
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has risen 5.6%.



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