Shares of Oatly Group (NASDAQ: OTLY) fell by as much as 27% this week, according to data from S&P Global Market Intelligence. The oat milk company posted disappointing earnings for the third quarter, leading investors to sell off the stock. As of 12:06 p.m. EST on Friday, shares are down 22.4% this week.

On Nov. 14, Oatly reported its financials for the three months ending in September. Revenue increased 7% year over year to $183 million, even with some foreign exchange headwinds. But that is the extent of the good news from the report.

Due to supply chain difficulties, a lack of execution at the company's distribution facilities, and COVID-19 lockdowns in Asia, Oatly's gross margin declined significantly in the third quarter. Gross profit was $4.9 million, down from $44.8 million a year ago, giving the oat milk brand a gross margin of only 2.7%. Unless you have a revenue base in the tens of billions of dollars (Oatly doesn't) and a lean expense structure, it is going to be extremely difficult to generate positive cash flow with those margins.

Continue reading

Source Fool.com