Release Date: May 13, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

De'Longhi SpA (FRA:DLN) reported a robust 14.6% increase in turnover for Q1 2025, driven by a 7.2% organic growth in the household division and a 22% growth in the professional division. The professional coffee area, now accounting for 13% of total business, grew by approximately 22% in the quarter, reflecting strong performance in both commercial and home segments. The company received numerous awards for its product designs, including the Red Dot and IF Design Awards, highlighting its commitment to innovation and quality. De'Longhi SpA (FRA:DLN) launched a significant global marketing campaign featuring Brad Pitt, expected to enhance brand visibility and consumer reach. The company has successfully implemented a tariff mitigation strategy, relocating production to Southeast Asia and Europe, which is expected to minimize the impact of tariffs on its financials.

Negative Points

The Starbucks cold coffee project was unexpectedly halted, although it was not factored into the company's guidance, indicating potential volatility in partnerships. The nutrition and food preparation segment experienced a slowdown, attributed to challenging comparisons with the previous year and market weakness in the United States. Despite strong Q1 results, De'Longhi SpA (FRA:DLN) maintained its full-year guidance, suggesting a cautious outlook due to potential macroeconomic uncertainties. The company faced increased logistics and freight costs, which impacted its overall cost structure despite improvements in gross margins. Inventory levels increased significantly, leading to cash flow challenges, although this was a strategic move to mitigate tariff risks.

Q & A Highlights

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Q: Your Q1 revenue growth is almost 15%, but for the full year, you have left your revenue growth guidance unchanged. Is this just conservatism, or are you expecting some changes? A: We are not changing the guidance because we anticipated a stronger Q1 due to the change in perimeter. Our organic growth for the quarter is 8.8%, which is higher than the full-year guidance. However, we expect tougher comparisons in the second half, so we are maintaining our guidance.

Q: Can you elaborate on the net impact of tariffs and the mitigation actions that lead to the net 15 million impact? A: The 15 million impact is due to tariffs affecting not just China but also Southeast Asia and Europe. We have implemented a comprehensive tariff mitigation strategy, including sourcing diversification and commercial actions. We are relocating production to Southeast Asia and Europe to minimize the impact.

Story Continues

Q: Regarding the Starbucks project, is it a final stop, or is there a possibility of resuming it? A: The Starbucks project is currently at a definite stop due to uncertainties in the U.S. market. However, we may resume discussions next year. The project was not factored into our guidance, so there is no material impact on our plans.

Q: Can you provide more details on the gross margin improvement? How much was driven by revenue versus cost savings? A: The gross margin improvement was primarily driven by volume and mix, with some lower costs in terms of cost of goods. However, we also faced additional logistics and freight costs, which impacted the gross margin.

Q: What are your expectations for the professional business, which grew by 22%? Is this growth sustainable? A: We expect the professional business to continue its strong momentum, with both brands achieving double-digit growth. The order intake is positive, and we anticipate meeting our double-digit growth ambitions for this division throughout the year.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

This article first appeared on GuruFocus.

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