Sonos Now Mostly Exempt From Tariffs, Expects Duty Refunds to Mitigate Effects in FY21
Wireless home audio systems maker Sonos reported higher-than-expected revenue, an $18.4 million profit and growth in new households in Q4. Gross margin increased 530 basis points to 47.5% as the company was “largely exempt from tariffs,” except for a rate…
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of 7.5% on component products in September and 25% on accessories throughout the quarter, Chief Financial Officer Brittany Bagley said on a Nov. 18 investor call. Adjusted EBITDA increased 22% to a record $109 million, including $32 million in tariffs, of which Sonos will receive a refund of about $30 million, which will largely mitigate the ongoing impact of tariffs in fiscal year 2021, she said. The company plans to have its production shift to Malaysia completed by summer as part of a plan to diversify manufacturing venues, Bagley said. Sonos system products revenue increased 17%, driven by strength in the installer channel, but the Amp and Arc products are supply constrained. The company is investing in expedited airfreight shipments to better meet demand but will continue to be low on stock on key products in the current quarter, Bagley said. It expects to be fully stocked across all products by the end of fiscal Q2. Sonos doesn’t provide quarterly guidance, but it expects the holiday quarter to contribute “slightly less total revenue” as a percentage of the total fiscal year than last year, Bagley said. She said supply chain constraints are “a broader industry wide challenge” that aren't unique to Sonos. The company is feeling impacts from component and container availability, port congestion, and higher shipping and logistics costs.