IRobot Cuts Full-Year Guidance Due to 'Challenging' Conditions in EMEA

IRobot cut full-year revenue guidance in its Wednesday Q1 earnings report on stunted growth in Europe, the Middle East and Africa. CEO Colin Angle cited higher inflation and lower consumer confidence in Europe and elsewhere stemming from the Russia-Ukraine war.

Market conditions “have become more challenging” since iRobot's February outlook, said Angle on an earnings call Thursday. Some orders have been pushed out, some were canceled, and the war in Ukraine is creating a “very time-correlated drop in consumer confidence,” along with higher inflation and lower sell-through rates. That’s leading retailers to become “more conservative in taking inventory positions with our product" and being less aggressive overall, he said. Guidance is the “best indication” of what the company expects over the rest of the year, but “there is still significant uncertainty as to how the rest of the year is going to unfold.”

Chief Financial Officer Julie Zeiler said 65% of the year’s revenue will be generated June-December. She noted the second-half ’22 outlook will compare against a prior-year period that was affected by limited component availability. Second-half revenue targets are “underpinned by existing inventory levels and the steps we’ve taken to improve supply chain continuity and resiliency,” she said.

The company expects modest growth declines in North America, Angle said. The company had planned to pay more than $40 million in tariff costs this year, and its updated outlook reflects plans to redirect about half of tariff-related savings to promotional activity to boost sell-though rates, Zeiler said. The rest of savings will allow the company to work down on-hand inventory “burdened by incrementally higher supply chain costs,” she said. Angle said the company is looking at its “basket of resources” to maintain its market position. Some upcoming promotional activity is to “motivate customers to get out of their chairs and help continue to drive this category's growth” and to “make sure that our lineup remains as competitive as it can be.”

IRobot was granted a temporary exclusion from Section 301 List 3 tariffs in March by the Office of the U.S. Trade Representative, which is expected to bring refunds of about $30 million, Zeiler said: $6 million for Q1 tariffs paid, $12 million for tariffs paid on Roomba robots imported after Oct. 12 and $12 million for on-hand inventory imported post-Oct. 12. The exclusion eliminates the 25% tariff on Roomba products retroactive to Oct. 12 and continuing through Dec. 31, she said. Customs and Border Protection will issue multiple refund payments over the next 12 months, she said.

On supply chains, Angle credited second-sourcing component efforts and “more manageable” shipping costs with positioning the company well for product availability through the second half. "We’re not headed back to where it was 18 months ago,” he said, noting “sporadic” factory shutdowns and component shortages. “Not out of the woods,” he said, “but the headwinds that supply chain were for us last year are definitely substantially eased in 2022. We will have the products that we need, shipping costs are more manageable and with all of the work we’ve done in dual-sourcing, we believe we have access to the components we need to build the product.”

Angle maintains the robot industry is still at “the beginning.” IRobot’s vision “extends beyond vacuuming, and the lawn is a "very attractive adjacent market,” he said. It's one of several new areas of development with adjacent products that the company is looking at for product development.

IRobot's revenue in the U.S. grew 33% in Q1, with premium robot sales of $500 or more growing by 30% in the quarter; robots priced $300-$499 comprised 86% of Q1 sales vs. 84% in the prior-year quarter, the company said. Air purifier sales were $3 million; the company expects the category to grow to over $40 million this year. E-commerce sales were 62% of Q1 revenue, and direct-to-consumer sales grew 17% to $41 million.

IRobot’s full-year revenue guidance is now $1.64 billion-$1.74 billion, down from a February projection of $1.75 billion-$1.85 billion. Earnings per share guidance dropped to minus 37 cents per share to 23 cents per share. The stock closed 5.7% lower Thursday at $53.09.