iRobot (NASDAQ: IRBT) investors had a great Wednesday morning as shares gained 10.7% compared to a modest drop in the S&P 500. However, the consumer tech company, which specializes in robotic home cleaning devices, is still in deeply negative territory for the year. Its shares are down by more than 70% in 2024 so far, while the market is up 9%.
Wednesday's boost came as investors became a little less pessimistic about iRobot's near-term growth prospects following the release of its first-quarter earnings report after the close Tuesday.
Still shrinking
Investors had low expectations for the company heading into the earnings report. Amid rising competition, demand for iRobot's core cleaning products has been slumping for several quarters. Also, shoppers have pulled back on spending in this category, too, after sales soared during the early stages of the pandemic. Unfortunately, those negative trends persisted in Q1.
iRobot managed to boost sales volumes slightly, with robot unit shipments improving to 456,000 from 436,000 in the prior-year period. Yet the company had to slash prices to secure that growth. Average selling prices slid to $346 from $402 a year earlier. As a result, overall sales fell to $150 million from $160 million.
Yet that result beat management's short-term target, mainly around cost cuts. "We exceeded our financial expectations for the first quarter as our team executed on our restructuring plan to significantly improve iRobot's near-term operations," outgoing interim CEO Glen Weinstein said in a press release. .
The path forward
iRobot is still facing huge challenges as it works to stabilize growth and return to profitability in the wake of a failed acquisition bid by Amazon. Sales are on track to decline again this fiscal year, and management projected significant net losses ahead.
The stock rebounded anyway on Wednesday morning, partly because investors had been highly pessimistic about the business heading into this week's earnings update. It's encouraging to see progress, however modest, in iRobot's cost-cutting efforts. The appointment of a new CEO -- Gary Cohen, who was previously an executive at Gillette, Timex, and Energizer -- could mean more aggressive restructuring moves are ahead.
But most investors will want to watch this stock from the sidelines until there's a clear rebound path for the business.
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John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool's board of directors. Demitri Kalogeropoulos has positions in Amazon. The Motley Fool has positions in and recommends Amazon and iRobot. The Motley Fool has a disclosure policy.
