Sonos sounds warning on congestion, container costs

China 2678 Earnings 515 Info Tech - Tech Hardware 645 Quote Watch 284 Taiwan 167 Tariffs 1680 U.S. 4753

Smart speaker manufacturer Sonos reported fiscal Q4’20 revenues which increased by 16% year over year, or 7% when excluding seasonal effects. That compared to an expectation of 2% growth according to consensus estimates gathered by S&P Global Market Intelligence. The firm likely benefited from stay-at-home demand during the pandemic with growth expected to continued at a rate of 11% to 15% for the coming fiscal year.

The strong revenue performance came despite “the effects of COVID-19 and demand outstripped supplyaccording to CFO Brittany Bagley which “are a broader industry-wide challenge and not unique to Sonos“. Challenges for the firm include “component availability, container availability, congestion in ports to higher shipping and logistics costs“.

The challenges of logistics availability are not just a consumer electronics issue, as flagged in Panjiva’s research of Nov. 20, but do nonetheless raise the risk that supplies arrive well into the new year when consumer spending has already crested.

Panjiva’s data shows the challenges faced by Sonos’ supply chain with U.S. seaborne imports linked to the firm having surged by 55.2% year over year in August before sliding 32.8% in September. Normality may have returned somewhat in October with an increase of 1.6% year over year.

Peak volumes reached earlier than normal this year

Chart segments U.S. seaborne imports linked to Sonos by month.    Source: Panjiva 

Sonos has also been navigating a change in supply chain resulting from the Trump administration’s tariffs on imports from China. Those are unlikely to be removed in the short-term under the Biden administration while the turmoil caused by COVID-19 has also underscored the importance of maintaining a diverse supply chain.

That process may already be close to completion. The share of imports from China in U.S. seaborne imports linked to Sonos reached 61.6% in the three months to Oct. 31 compared to 82.6% in 2019 as a whole and 100% in 2018. 

The difference has been accounted for by imports from Taiwan which reached 35.4% of the total in the past three months as well as a small but growing component from Malaysia. That process has also included a shift away from Inventec as the firm’s main supplier to also include Wistron for supplies from Taiwan.

Other-shoring in action as Sonos reacts to tariffs

Chart segments U.S. seaborne imports linked to Sonos by origin on a monthly and three-month average basis.    Source: Panjiva 

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