The mission’s stock of produce is collapsing even after avocado prices rise. Here’s why.

0

Text size

Mission Produce said a new software system disrupted results far more than expected.

Sam Hodgson/Bloomberg

One would expect higher avocado prices to mean all is well with an avocado distributor. But the story turned out differently for Mission Produce.

The avocado packer’s stock slumped on Friday after it said difficulties implementing a new software system were not allowing the company to effectively manage its supply chain, leading to extreme erosion of margins in the first fiscal quarter ending in January.

The stock plunged about 11% to $11.83 in Friday morning trading.

Thursday night,


Mission products

(symbol: AVO) announced an adjusted loss of 17 cents per share for the January quarter, while analysts had expected earnings per share of 6 cents. Gross profit was $0.5 million in the first quarter, just a fraction of $22.7 million a year earlier.

Revenue for the quarter increased 25% year over year to $216.6 million. This is due to a temporary US ban on avocados from Mexico, which increased the average selling price of avocados per unit by 50%. But the gains from the sale of expensive avocados were partially offset by a decline in the volume of avocados sold. The company sold 18% fewer avocados compared to the previous year, while the American market saw a 10% drop in the supply of Mexican avocados.

The company’s new enterprise resource planning, or ERP, system, meanwhile, affected its entire marketing and distribution segment when it was implemented in November.

The Oxnard, Calif.-based company said it was shipping fruit with below-average yields and sourcing a disproportionate amount from third-party suppliers with higher margins, all due to poor visibility. on available stocks. The system also encountered billing issues, which resulted in late customer payments, Mission added.

The new ERP system was needed to scale businesses across geographies while establishing a higher level of security and control, CEO Steve Barnard said. And while the company was aware of the risk of business disruption during implementation, “the scale and scale were greater than expected,” he added.

Looking ahead, the company said it continues to address some of the ERP system challenges, while avocado prices will be flat to slightly higher on a sequential basis. In the second quarter, Mission Produce expects a year-over-year price increase of approximately 10-15%. However, it will also face inflationary pressures on transportation, labor and packaging costs.

The silver lining here is that the profit margin for boxes sold in February has returned to historic levels, the company said.

Write to Karishma Vanjani at [email protected]

Share.

About Author

Comments are closed.