PETITION

There are a number of trends that are taking hold currently that may be disruptive to a company that manufactures and distributes glass tableware (i.e., shot glasses, tumblers, stemware, mugs, bowls, etc.) and ceramic dinnerware products (i.e., servicing utensils and trays) to food service distributors, mass merchants, department stores, retail distributors, houseware stores, breweries and other end users of glass container products. First, people don’t go to department stores or houseware stores anymore (in case you hadn’t heard, check out the stock performance of every department store in the US and, for good measure, Bed Bath & Beyond ($BBBY)). Second, millennials aren’t drinking as much as Generation Z did. Third, people are ordering food more frequently and cooking and hosting dinner parties far less often than they did prior to VC-subsidized companies like UberEats ($UBER), Postmates and Caviar coming along. Indeed, per the company’s most recent report:

In U.S. foodservice, restaurant traffic for Q3 as reported by Black Box was down 3.6% compared to down 1.3% in Q3 of 2018.

All of these things are headwinds to a company like Libbey Glass ($LBY), an Ohio-based company founded in 1888. The longevity of the business is uber-impressive, but the year is currently 2019, and sh*t is unforgiving out there: Libbey is starting to look a bit troubled.

The company reported Q2 numbers back in August and revenue was down across all segments: food service and retail. The company cited “intense global competition” and trade headwinds (in both Mexico and China) as major factors. Net sales were $206.2mm, down 3.5% YOY, and the company reported a net loss of $43.8mm in the quarter (primarily due to a non-cash impairment charge). Notably, business was particularly bad in EMEA: $5.5mm decline. It was the second straight quarter where the business performed poorly on a year-over-year basis.

On the August 1 earnings call, the company noted:

“We do…continue to see declines in U.S. & Canada foodservice traffic, as has been reported by third-party research firms Knapp-Track and Blackbox every quarter since 2012. Our U.S. & Canada foodservice channel is currently performing in-line with market trends. Management expects these trends, and the challenging environment experienced during 2018 and the first half of 2019, to continue for the remainder of the year.”

In particular, one disturbing trend is takeout and delivery:

While this channel continues to adapt to the new norm of takeout and delivery, we've seen our focus on new products and differentiated service begin to pay dividends. In addition to these ongoing efforts, we are adapting our approach and resource deployment to expand into growing and/or underpenetrated segments of the channel, like health care and hospitality. As previously mentioned, we also see a significant opportunity to leverage digital tools to reach end users and further support our distribution partners.

Sure, they did. And they certainly needed to: a quick look at their numbers shows that the second quarter is typically the business’ strongest. This didn’t portend well for Q3 performance.

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