Unfavorable Mix Continues to Pressure Monster’s Gross Margin in 1Q; Shares Fairly Valued
While Monster Beverage posted impressive sales growth in the first quarter, with net sales up 15%, negative geographic and product mix continue to weigh on its bottom line. Gross margin fell 420 basis points to 60.6%, below the above-63% rate we expect longer term. This contraction was partly attributable to the adoption of a new accounting standard (ASC 606), which deducts commissions paid to The Coca-Cola Company (previously treated as an operating expense) from net sales (40 basis point drag ...Monster Beverage is a holding company. Through its subsidiaries, the company develops, markets, sells and distributes energy drink beverages and concentrates for energy drink beverages. The company has the following operating and reportable segments: Monster Energy? Drinks segment, which is primarily comprised of the company's Monster Energy? drinks and Reign Total Body Fuel? energy drinks; Strategic Brands segment, which is comprised primarily of the various energy drink brands from The Coca-Cola Company, as well as its energy drinks; and Other segment, which is comprised of certain prod ucts sold by American Fruits and Flavors, LLC, a wholly-owned subsidiary, to independent third-party customers.
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