Dive Brief:
- Solo Brands on Wednesday said there is “substantial doubt about our ability to continue as a going concern,” citing liquidity challenges and existing debt, according to the company’s 10-K.
- The company, which said it is exploring strategies to refinance its debt, said it risks defaulting on its obligations under its credit agreement. Such an event could cause Solo Brands to liquidate or file for Chapter 11 bankruptcy protection, the company said.
- The warning came as the company reported earnings. For the fourth quarter, net sales fell 13.2% year over year to $143.5 million, which was driven by declines in both its DTC and wholesale channels for its Solo Stove brand. For the full year, net sales fell 8.1% to $454.6 million.
Dive Insight:
Bankruptcy or liquidation could be on the horizon for Solo Brands, which saw sales slide, driven by disappointing performance in its largest segment, Solo Stove.
The brand saw declines across both its DTC and wholesale channels, with overall net sales falling nearly 17% in the fourth quarter to $116.6 million. For the full year, Solo Stove sales were down 15.4% to $297.4 million.
Chubbies, however, saw gains during the period, with sales up 12.2% to $24.2 million in Q4 and up nearly 11% to $112.7 million for the full year.
“The results from Solo Brands show a company that is really struggling,” GlobalData Managing Director Neil Saunders said in an email. “However, it is a company of two halves. Chubbies is doing relatively well, partly because it has growing brand recognition and a good channel strategy which includes selling through mainstream retailers. Solo Stove is a different story and unfortunately it is a bigger part of the business so it more than offsets the gains at Chubbies.”
Wednesday’s “going concern” warning adds to the company’s existing financial woes. Solo Brands began a complete review of its operations over a year ago as former CEO Chris Metz sought ways to turn the company’s fortunes around. His tenure with Solo Brands lasted just 13 months, with board member John Larson taking on the CEO role on an interim basis in February.
Last month, the company received a noncompliance warning from the New York Stock Exchange as its stock had been trading at less than $1.00 per share over a 30-day trading period. It has six months to comply or risk being delisted from the exchange. Founded in 2011 by brothers Jeff and Spencer Jan, Solo Brands was one of many DTC e-commerce brands to go public in 2021.
The company did not provide financial guidance “based on the challenging and uneven consumer environment anticipated this year and uncertainty with tariffs,” Chief Financial Officer Laura Coffey said on Wednesday’s earnings call.