Leading Brands says it’s poised for increased late-summer revenue
Energy and juice beverage company Leading Brands Inc. (Nasdaq: LBIX) is poised for rapid expansion beginning at summer’s end, executives said on a midday Thursday conference call.
Before Thursday’s opening bell, the Vancouver, Canada-based business reported a loss of $0.18 million, or $0.01 per share, for the first quarter ended May 31, versus a profit of $0.26 million, or $0.02 per share, during the year-ago period. The company recorded $10.5 million in first-quarter revenue, compared with $13.2 million in the same period of 2006.
During the quarter, revenue from Leading Brands’ proprietary brands was up about 75% from the prior-year’s first quarter. The company expects sales of its TrueBlue blueberry drink to further propel revenue growth, said CEO Ralph McRae. Recently, the company announced the nation-wide distribution of TrueBlue in 7-Eleven convenience stores.
“We’re very excited about what lies ahead,” McRae said on the call. “We see a really nice growth pattern with the [TrueBlue] brand.”
Leading Brands is also looking to expand the TrueBlue drink beyond 7-Eleven stores. McRae said the company is “always” making pitch presentations to other chain stores. The TrueBlue blueberry beverage will quickly be available for sale in about half of 7-Eleven’s more than 6,000 stores, he said, but the company will have to do some work to expand to all the stores. The impact of the 7-Eleven deal will be reflected in the company’s third quarter results, McRae said.
“By the end of summer and early fall, we’ll know the success of TrueBlue,” McRae said.
Summer’s end will be a busy period for Leading Brands. Along with introducing TrueBlue in 7-Eleven outlets, the company plans to offer a new, high-margin energy drink. In June, Leading Brands launched the Stoked energy drink. The company is differentiating the Stoked drink from the crowded energy drink market by using natural sugars and health-oriented flavors. A Stoked-sponsored Canadian video gaming team has increased interest in the product’s website, McRae said.
The company wants its products to fill the gap that will be left by Glaceau’s VitaminWater after it leaves for the Coca-Cola Co. (NYSE: KO) distribution system, from the independent system, he said. Coke, which acquired VitaminWater last month, has also been reportedly mulling over the purchase of Cadbury Schweppes plc’s (NYSE: CSG) Snapple brand of iced tea.
McRae said Leading Brands is not interested in selling products under other business’s names – known as the private labeling market. The company’s private labeling business is being diminished. Some chains such as Trader Joe’s, which requires 100% juice, have strict requirements, he said. However, the requirements do not always produce a better juice, as many companies simply use 100% apple juice and flavor additives to meet requirements.
Also on the call, McRae said:
• The company expects gross margins between 45% and 60% going forward
• The company has received an increase in analyst calls over the last two to three months
• The NBC affiliate in Chicago held a segment on the health benefits of TrueBlue
• The company has had more success in the American private school market than the public school market, due to the lengthy bidding and centralized buying process of public schools
In midday trading, shares of Leading Brands were up $0.15, or 3.66%, at $4.25.
