By Jeremy C. Owens
In a sign of continuing worries about e-commerce activity, Kornit Digital Ltd. slashed its forecast for the second quarter Tuesday and suggested the third quarter isn’t expected to be much better, sending shares into a spiral in after-hours trading.
Kornit Digital /zigman2/quotes/201434077/composite KRNT +19.55% executives announced that they now expect revenue of $56.4 million to $59.4 million in the second quarter, after previously projecting $85 million to $95 million in sales for the period. The Israeli company — which markets itself as “the operating system for fashion” and is most well-known for selling digital printers that can make clothing on-demand — produced $81.7 million in sales in the same quarter a year ago, suggesting a revenue decline of more than 27%.
“The overall re-calibration of e-commerce growth, combined with macro headwinds which meaningfully accelerated in the last few weeks of the quarter, as well as delays in the completion of customer production facilities, resulted in a significantly slower pace of direct-to-garment (DTG) systems orders in the second quarter as compared to our prior expectations,” Chief Executive Ronen Samuel said in a statement.
Executives provided an early third-quarter forecast that called for sales “to be at or above second-quarter revenues.” Analysts on average expected third-quarter revenue to top $100 million, according to FactSet, which would have been a first for the company.
Online shopping, which spiked during the COVID-19 pandemic, has slowed down as shops have opened back up, which has crimped previously high-flying companies that service the sector, such as Shopify Inc. /zigman2/quotes/209033712/composite SHOP +10.50% . Kornit has deep ties with Amazon.com Inc. /zigman2/quotes/210331248/composite AMZN +3.53% , which is cutting costs after running into a growth slowdown of its own — Amazon accounted for 27% of Kornit’s revenue in 2021, according to Kornit’s annual report to the Securities and Exchange Commission.
“We have entered a period where some of our customers are working through excess capacity built throughout the two-year pandemic period, which we expect to continue for the near term,” Samuel said in the announcement.
Kornit shares dove 20% in after-hours trading following the announcement. The stock has already shed nearly 80% of its value this year, falling 79.3% and chopping the company’s market valuation from a peak of more than $8 billion in late 2021 to less than $1.6 billion as of Tuesday’s close.