New York City’s BARK, Inc. (BARK) is a leading global retailer of dog products. On June 2, 2021, the company went public through an SPAC deal. It merged with blank check company Northern Star Acquisition Corp. and raised $427 million in cash proceeds.
On January 10, BARK’s co-founder and Executive Chairman, Matt Meeker, became the company’s CEO. Meeker had previously served as BARK’s CEO for nine years following the company’s inception in 2011. Following his reappointment, Meeker said, “I am eager to resume the role of Chief Executive Officer and build on the momentum that Manish and the talented team at BARK have achieved…I believe that the next few years will be transformative for BARK as we leverage our scale and brand to grow our footprint in areas like food and health—initiatives that I am passionate about personally.”
Shares of BARK have gained 7.7% in price since the appointment news to close yesterday’s trading session at $3.66. However, the stock has declined 13.3% year-to-date.
Here is what could shape BARK’s performance in the near term:
Negative Profit Margins
BARK’s trailing-12-month net income margin stands at negative 11.07%, Its EBITDA margin is negative 11.65%, while its levered free cash flow margin is negative 22.22%. In addition, the company’s trailing-12-month ROE, ROA, and ROTC are negative 82.25%, 11.21%, and 21.69%, respectively.
For its fiscal 2022 second quarter, ended Sept. 30, 2021, BARK’s revenues increased 39.1% year-over-year to $120.16 million. Its gross profit came in at $69.89 million, up 35.6% from the same period last year.
However, the company’s loss from operations widened by 2,158.3% from the prior-year quarter to $15.42 million. This can be attributed to a 63.3% rise in its total operating expenses. Its net income amounted to $6.46 million due to a $23.18 million gain from changes in the fair value of warrant liabilities. Excluding such gains, BARK’s net loss stands at $16.72 million.
POWR Ratings Reflect Bleak Prospects
BARK has an overall D rating, which equates to Sell in our proprietary POWR Ratings system. The POWR Ratings are calculated by considering 118 distinct factors, with each factor weighted to an optimal degree.
BARK has a D grade for Quality and Value. The company’s negative profit margins justify the Quality grade. In addition, BARK’s negative forward P/E multiple is in sync with the Value grade.
Of 46 stocks in the Specialty Retailers industry, BARK is ranked #41.
In addition to the grades I have highlighted above, view BARK ratings for Growth, Momentum, Stability, and Sentiment here.
Since the pandemic, the demand for pet products has skyrocketed because more people than usual have been keen to adopt pets because they work remotely. While BRK’s revenue growth reflects the industry tailwinds, the company has failed to generate profits. Given the increasing competition in the pet care industry, BARK’s negative profit margins might limit its growth potential over the long run. Analysts expect the company’s EPS to remain negative until at least this year. Thus, we think the stock is best avoided now.
How Does BARK, Inc. (BARK) Stack Up Against its Peers?
While BARK has a D rating in our proprietary rating system, one might want to consider looking at its industry peers, Destination XL Group, Inc. (DXLG), Cato Corporation (CATO), and Tile Shop Holdings, Inc. (TTSH), which have an A (Strong Buy) rating.
Note that DXLG is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Stocks Under $10 portfolio. Learn more here.
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BARK shares were trading at $3.45 per share on Friday morning, down $0.21 (-5.74%). Year-to-date, BARK has declined -18.25%, versus a -7.17% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities. More...
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