SharkNinja, Inc. (SN) Earnings Call Transcript & Summary

Good morning, and welcome to this next session of the Goldman Sachs Global Consumer and Retail Conference. My name is Brooke Roach, and I cover the apparel softlines and brand sector here at GS. And I'm thrilled to introduce our next session with SharkNinja. Here with me on stage today is Mark Barrocas, CEO and Director; and Adam Quigley, CFO. Welcome, Mark, welcome, Adam.

Thank you.

Thank you, Brooke.

Mark, let's kick it off with a discussion about the of the business.

You've now delivered 13 quarters of double-digit growth. And last quarter, you materially increased your fiscal '20 outlook. As you look across each of these drivers of the business, -- what gives you the most confidence that SharkNinja can continue this momentum?

Yes. Brook, in the second quarter earnings release, I made a point to really focus on the core and base business because I think it's something that is really misunderstood by investors. They look at our new products and they look at our international expansion, and I think they missed the fact that underlying all of this is a really healthy core base business growing at mid- to high single digits. And then you layer on top of that the new products, and you layer on top of that, the international growth and it translates into a really strong growth algorithm in mid- to high teens. Last quarter, we were low 22% growth. But it's that base business strength that I'm most excited about. I mean if you think about this year and take a category like upright vacuum is probably our most mature category, we launched a product called the Shark Transformer it raised average sell price. It improved gross margins in a market that is declining 1%. Our business is growing 5%. So there's lots of pieces. I mean, across 41 product categories it's funny, you come into a conference like this, and everyone wants to talk about the new water purification, the Ninjahydracens that we just launched or big TAM that we're entering into or the Crispy microwave and the microwave category that we're launching into or international expansion. But as you look under the hood of the business, like it's the strength of the core base business, we don't have a leaky bucket. We do have a very core base business. And then, again, you layer on top of these other growth drivers and that gives you the really strong growth that you're seeing from us.

Great to hear. I know there is a lot of discussion around some of the incremental new category expansion of SharkNinja givn that you open 1 to 2 new categories per year. current TAM is $125 million to $130 billion. And every year, you grow these categories. What categories do you see as most attractive that you're not in today? And what makes these categories desirable are new categories coming at a smaller TAM than current products as you continue to build?

Look, again, you come to these investor conferences and the answer is like have you the more categories to go into. Are there any more places for SharkNinja to expand to. And I think if we were sitting here last year at this time, which are 3 new categories this year. The first was water purification. I mean, a $6 billion TAM Okay. So is the TAM big? I mean, the TAM is enormous, okay? Even if we get 10% of that market, the $600 million business, we entered into microwaves, a $4 billion TAM. So we've added $10 billion of TAM in those 2 categories. And we've developed really disruptive products. I mean who wants Ocean media was talking about water purification before the last 4 weeks. Who was talking about microwave on social media? I mean we've got an incredible campaign that's going to be coming out in advance of Thanksgiving with lots and lots of creators talking about making their Thanksgiving turkeys in microwave. I mean there's so much excitement around some of these categories that have been dead categories for years. And then the third category we launched into was the Shark blast Box, which was an indoor outdoor blower and that is going to give us a big road map of products into '27 and '28. So you have a category with virtually no TAM, where we're only product in the category. You've got products like water and microwave. But what it points to is that there's just so many more places for SharkNinja to expand into. I mean what I'm so excited about is we just launched our next -- in the U.K., we launched our next-generation Shark Cryo Gro called the Cryo Gro clinic. It has 2x the power. It has a chest plant together with it. so you can do your neck and your chest area. It's designs that you can also do your hands. We found that the hands are kind of the third most important spot on the person's body that they want to get wrinkle reduction or kind of age reduction. In fact, it's the first place on your body that shows aging. I think with the success that we've had in skin you're going to see us expand into places like wellness. I think wellness is an incredible growth opportunity for us as we move forward. physical wellness, environmental wellness in your home I think that's some place that Shark absolutely has the right to play in. And I think, Brook, you've heard me talk about the fact that it starts with can we come up with something where we can honestly say what gives us the right to be in the business. I think when you look at what we've done in something like water purification, where we're bringing performance of a multi-thousand dollar product to your countertop and making it so easy for you to be able to get clean water is something that is really not just exciting the category, but is disrupting the category. And then the last thing I would just say on the question that you brought up is every time we enter into these new categories, it's expanding the demographics of the consumers. I mean I can't tell you how many kids went off the summer camp this year with sharp show pills. I can't -- there's kids that are asking for our products for Christmas. We're outfitting dorm rooms. I mean if you go to college campuses, I mean, look at the number of Shark and Ninja boxes during move-in day. we're outfitting your first apartment. When you move into your first apartment or you have a family you have more kids and you move into a house. So we're taking you through the whole life cycle of the consumer. And again, we're doing it across socioeconomic groups. We're not talking about going after the same consumer I mean we're selling $59, $79, $99 products to the Walmart consumer and we're selling $1,000 grills at Home Depot or Sephora, more expensive products. So I think when you look at the categories we can enter into, when you look at the demographic groups we're targeting and engaging with when you look at the socioeconomic groups, the TAM is going to continue to keep growing.

Very clear. You mentioned social media and some of the ad campaigns that you have for some of these new product launches. But 1 really exciting area of growth for SharkNinja is TikTok Shop affiliates and social commerce. What percent of the business do these channels represent in 2026 by geography? How quickly do you see this business growing? And what's differentiated about sharing's approach here that can sustain this momentum even as competitors might start to catch on a little bit?

Yes. Well, look, we're the largest brand on Tik Tok shop in the U.S. with a large brand in the U.K., we're largest brand in Germany, we -- up until May, we were only in the U.S. and U.K. In May, we launched in Germany, France, Spain, Italy and Mexico. By the holiday selling season, we'll have shops up in 12 or 13 countries around the world. So as it relates to like how large as a percentage of business, I mean, that's not something we're going to talk about until we get kind of a full year under our belt. I mean, let's keep in mind that like the first product that we sold on ticktock shop was August of '25. I mean it's not like this is a channel that is usually mature. I mean we haven't even gone through a full year -- full fiscal year selling on TikTok shop. Now the other thing I would say is I think it's a misnomer to think about this as just TikTok shop. We're growing with meta affiliates. We have an edit team in our office last week with a big hack they're making a big, big push into this. While TikTok has a first mover advantage, TikTok is metas reacting YouTube affiliates. We're doing a lot more with -- so I think you have to look at this as a whole in terms of the view of social commerce and what role is social commerce going to play in our business moving forward, I think that some of the retailers are going to get involved in this. Mercado Libre has come out and said that they're going to develop their own affiliate program. I think ultimately, people are recognizing that this is a really interesting channel of distribution. I mean, the consumer today opens up their phone and they have 1,000 QVC channels just by opening TikTok or Instagram. So it's an incredible way. And the other thing I would say about it is, and I ask investors that almost every meeting that I have, have you ever shopped on TikTok shop. And like 99.9% of you say, no, which I find amazing because your investors in the category, this is the biggest change, I think, in consumer retail since Amazon -- it's totally frictionless. I mean I go on tick talk shop and I buy 3 things, and I even know that I bought the 3 things, stuff just shows up in your house. And so it's a very, very easy interface and user experience. Now in terms of sharing advantage in the space, look, I mean, you could say the same thing about Amazon. I mean, SharkNinja has a great advantage on Amazon. I mean, we -- our search and our algorithms, consumers are hitting on our products constantly. Consumers are searching for us by name. I think we have a great moat that we're creating from an analytics standpoint. Social commerce doesn't stand on its own. There's also a spillover effect. So some amount of that revenue is staying on the platform, but some amount of that revenue is spilling over into other channels, Amazon, Walmart.com, our direct-to-consumer site, target.com Best Buy, I mean, all of these people are also beneficiaries of marketing and advertising and selling that's being done on the social commerce sites.

Very clear. Let's shift to some topical trends. And 1 area that's been in focus is the domestic growth rate. You've indicated confidence in the domestic business growing double digits in the back half and into 2027 despite some toughening comparisons. Can you unpack this? What underpins your confidence even as many of your key tail partners have started to show some recent volatility?

Yes. Well, look, we came out of the first quarter and we reaffirmed that we felt like the domestic business was a double-digit growth business for us. First half of the year, we delivered double digits. I mean, we believe we'll deliver double digits in the back half of the year as well. I think, Brook, it points to the strength of the core. We obviously track POS on a daily basis at all of our major retailers. Of course, our direct-to-consumer site, our TikTok shop and our social commerce business. And we're seeing good strength in the core base business. Again, you layer on top of that the new categories and the new products that we're launching. And that's what gives us a lot of confidence and the support that we're getting from the retailers. I talked about the fact that Walmart was our 1 major retailer in '25 that didn't grow in Q4. We had the Walmart team in our office last week. We're set up for a great second half of the year with Walmart. I encourage you to go and look at these vignettes that we've created in Walmart with Ninja products with all different colors. There's influencers that are going into Walmart stores and are doing content in front of these [indiscernible]. The stores that have them are growing at a very significant clip. I mean, we're talking to them about doing all types of things in store that we would never have discussed a year ago at this time -- 2 years ago at this time. colors, drop-ins, special colabs, things like that. And it doesn't just go to Walmart. I mean, we're having that with Target and Best Buy. We're doing great with Costco and Sam's. I think what you're seeing in the domestic business is our omnichannel model really on display, a strong brick-and-mortar retail business com business, a strong direct-to-consumer business, a social commerce business. There's just so many ways for the consumer to be able to engage with us. But again, it all starts with do we have products that consumers love. And are we getting them excited by the marketing that we're putting out and generating. And I think the answer is yes. I mean -- if you just look at the last couple of days, I mean, 2 days ago, we launched a new product in the cookware space. Today, actually, this morning, we just launched a product called the Ninja Multi Pod. Two weeks ago, 3 weeks ago, we just launched a product called the Shark AquaReach in kind of a 2-in-1 floor cleaning space. So there's just a lot of new innovation that is coming and kind of driving excitement within the domestic business. And the last thing I would say is, look, we're going to grow our Canada business. I mean I've never spoken so much about Canada in the 18 years of running the business as I have in the last 2 quarters just because we've evolved and changed our model in Canada from being a very heavy direct import business to being a buyout of the warehouse business. And so that now has flushed through at the end of Q2. We're going to grow our business in Q3. We're going to see strong growth in Q4, and I think that will position us well as we head into '27.

One question that we commonly get about your domestic business on wholesale, in particular, is that of inventory levels and how to think about sell-in versus sell-through as well as shelf space. Do you think that there's more opportunity for more shelf space? And are you seeing anything odd when it comes to inventory levels at retail?

Well, look, the first thing I could say to you is that I think this year in for a number of reasons, we missed sales due to not having enough supply in our domestic business. I think our domestic business grew faster than what we expected. I think we had some supply and demand forecasting challenges. So if anything, I think that we left some business on the table in due to low in stocks and low replenishment rates that we'll see hopefully as a benefit as we move into 2027. Our POS has, if anything, been tracking with shipments or even a little bit ahead of shipments. So I think me personally, I think inventory levels are light at retail. But I don't think that's as a result of the retailers. I think that's as much of our doing as it is the retailer is doing. So that is not something that I think is a big concern for us moving forward.

Very clear. One question we're asking all companies at our conference today is 1 on the health of the consumer. What are your expectations for the environment in the second half of '26 by geography? And do you expect things to be the same, better or worse? And then a follow-up on that, do you expect the help of the consumer to be better, the same or worse in '27 versus '26?

Yes. Look, this is such an interesting question, right, because I mean I think everyone comes to these conferences thinking the consumer is down. And then a few months go by and like, oh, the numbers were better than what we expected from a consumer perspective. I will say that like, listen, since 2008, our industry has grown at a compounded growth rate of 1.5% a year. This is not kind of a frothy industry. I mean, other than the 18 months 15 months during COVID, we've never experienced a high-growth, double-digit type industry growth. Listen, I think the consumer obviously continues to be under pressure. I mean as long as gas prices are sitting at $6, as long as sentiment is what it is. That being said, there is a certain amount of dollars that the consumer has to spend, will spend is excited to spend. And I think they're going to be very discerning about where they spend those dollars. And I've said this over and over again, like I don't believe that we're competing against what this group would consider our core competition. I don't think we're competing against other home appliance companies. I think we're competing against Olive Garden. And I think we're competing against Royal Caribbean. I think the question is, does the consumer go out to dinner 2 more times? Or do they buy an Ninja CRISPYPro they can use at home to cook all the time. Is the consumer going to go on vacation? Or are they going to pull back on that cruise and invest it more in holiday purchases. So what our job is, is we have to continue to develop exciting disruptive products. We have to continue to keep telling our story that drives viral excitement from the consumer and we need to keep driving our omnichannel strategy. And I think over the last 18 years, what that has shown us is there is a certain amount of consumer discretionary spend that we've got to give the consumer a reason to invest it with SharkNinja versus investing it somewhere else.