Sonos CEO: Consumers are 'still buying' despite inflation

A little stability has returned to Sonos’ business weeks after a surprise sales and profit warning as consumers cut back on discretionary purchases during the second quarter due to inflation.

The connected speaker maker reaffirmed its full-year guidance ahead of a presentation by CEO Patrick Spence at the Goldman Sachs Communacopia + Technology Conference.

“We saw a real turn in June, which was a surprise to everyone,” Spence told Yahoo Finance Live at the event (video above). “And we saw that compounded then by retailers as well. But [since then], we’ve seen stabilization. We think that they’re being cautious but they’re still buying.”

In June, inflation surged 9.1% year-over-year, the most since November 1981. On a month-over-month basis, inflation ticked up 0.3%, the largest monthly increase since 2005. Those numbers have since cooled down, however, though still remain relatively high.

Amid the economic uncertainty, Sonos implemented a hiring “pause” last month in an attempt to better manage expenses, Spence said. In the meantime, the company is “taking a second look” at where it should be investing its money to ensure it’s set up for the future.

Despite many labeling the current economic environment as “recessionary,” Spence hesitated to call it as such.

“I’ve never been in a situation where so many economic indicators look good, what you wouldn’t expect in a recession,” he said. “And then there’s a few that do look like that. Just like the pandemic, none of us have lived through anything like this… I’m not an economist, but it feels a little challenging.”

Sonos marked down its full-year sales growth guidance to 1-2% from 14-16% previously. Adjusted operating profits are seen in the $215-$230 million range, down from a prior outlook of $290-310 million.

Wall Street is sticking with Sonos, though.

“We were wrong to believe SONO would be more insulated from consumer weakness due to exposure to a higher-end customer,” Jefferies Analyst Brent Thill wrote in a note following Sonos’ latest earnings results. “Pressures to SONO are macro-related and are not the result of competition. We believe there is strategic value in SONO and expect they can recover along with the consumer.”

Thill reiterated a Buy rating on Sonos shares.

Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.

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