Bark (BARK)

Pet products provider Bark (NYSE:BARK) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 5% year on year to $115.4 million. Next quarter’s revenue guidance of $100 million underwhelmed, coming in 21.6% below analysts’ estimates. Its non-GAAP profit of $0.01 per share was in line with analysts’ consensus estimates.

Company Overview

Making a name for itself with the BarkBox, Bark (NYSE:BARK) specializes in subscription-based, personalized pet products.

The toys and electronics industry presents both opportunities and challenges for investors. Established companies often enjoy strong brand recognition and customer loyalty while smaller players can carve out a niche if they develop a viral, hit new product. The downside, however, is that success can be short-lived because the industry is very competitive: the barriers to entry for developing a new toy are low, which can lead to pricing pressures and reduced profit margins, and the rapid pace of technological advancements necessitates continuous product updates, increasing research and development costs, and shortening product life cycles for electronics companies. Furthermore, these players must navigate various regulatory requirements, especially regarding product safety, which can pose operational challenges and potential legal risks.

Competitors operating in the pet care and products industry include Chewy (NYSE:CHWY), Petco (NASDAQ:WOOF), and Amazon (NASDAQ:AMZN).

A company’s long-term sales performance can indicate its overall quality. Any business can experience short-term success, but top-performing ones enjoy sustained growth for years. Thankfully, Bark’s 16.6% annualized revenue growth over the last five years was decent. Its growth was slightly above the average consumer discretionary company and shows its offerings resonate with customers.

Long-term growth is the most important, but within consumer discretionary, product cycles are short and revenue can be hit-driven due to rapidly changing trends and consumer preferences. Bark’s recent performance marks a sharp pivot from its five-year trend as its revenue has shown annualized declines of 4.9% over the last two years.

This quarter, Bark missed Wall Street’s estimates and reported a rather uninspiring 5% year-on-year revenue decline, generating $115.4 million of revenue. Company management is currently guiding for a 14% year-on-year decline in sales next quarter.

Looking further ahead, sell-side analysts expect revenue to grow 10.9% over the next 12 months. Although this projection suggests its newer products and services will catalyze better top-line performance, it is still below the sector average.

Operating margin is an important measure of profitability as it shows the portion of revenue left after accounting for all core expenses – everything from the cost of goods sold to advertising and wages. It’s also useful for comparing profitability across companies with different levels of debt and tax rates because it excludes interest and taxes.

Bark’s operating margin has been trending up over the last 12 months, but it still averaged negative 8.3% over the last two years. This is due to its large expense base and inefficient cost structure.

In Q1, Bark generated a negative 5.7% operating margin. The company's consistent lack of profits raise a flag.

Revenue trends explain a company’s historical growth, but the change in earnings per share (EPS) points to the profitability of that growth – for example, a company could inflate its sales through excessive spending on advertising and promotions.

Although Bark’s full-year earnings are still negative, it reduced its losses and improved its EPS by 100% annually over the last three years. The next few quarters will be critical for assessing its long-term profitability.

In Q1, Bark reported EPS at $0.01, up from $0 in the same quarter last year. This print easily cleared analysts’ estimates, and shareholders should be content with the results. Over the next 12 months, Wall Street is optimistic. Analysts forecast Bark’s full-year EPS of negative $0.02 will reach break even.

If you’ve followed StockStory for a while, you know we emphasize free cash flow. Why, you ask? We believe that in the end, cash is king, and you can’t use accounting profits to pay the bills.

Over the last two years, Bark’s demanding reinvestments to stay relevant have drained its resources, putting it in a pinch and limiting its ability to return capital to investors. Its free cash flow margin averaged negative 1.6%, meaning it lit $1.64 of cash on fire for every $100 in revenue.

Bark burned through $11.99 million of cash in Q1, equivalent to a negative 10.4% margin. The company’s cash burn was similar to its $3.17 million of lost cash in the same quarter last year.

As long-term investors, the risk we care about most is the permanent loss of capital, which can happen when a company goes bankrupt or raises money from a disadvantaged position. This is separate from short-term stock price volatility, something we are much less bothered by.

Bark burned through $13.24 million of cash over the last year. With $94.02 million of cash on its balance sheet, the company has around 85 months of runway left (assuming its $85.17 million of debt isn’t due right away).

Unless the Bark’s fundamentals change quickly, it might find itself in a position where it must raise capital from investors to continue operating. Whether that would be favorable is unclear because dilution is a headwind for shareholder returns.

We remain cautious of Bark until it generates consistent free cash flow or any of its announced financing plans materialize on its balance sheet.

We were impressed by how significantly Bark blew past analysts’ EBITDA expectations this quarter. On the other hand, its revenue missed, and its revenue and EBITDA guidance for next quarter fell short of Wall Street’s estimates. Overall, this was a softer quarter. The stock traded down 12.9% to $1.18 immediately after reporting.

Updated: June 16, 2025 at 10:57 PM EDT

Are you wondering whether to buy Bark or pass? We urge investors to not only consider the latest earnings results but also longer-term business quality and valuation as well.

We cheer for all companies serving everyday consumers, but in the case of Bark, we’ll be cheering from the sidelines. Although its revenue growth was good over the last five years, it’s expected to deteriorate over the next 12 months and its cash burn raises the question of whether it can sustainably maintain growth. And while the company’s projected EPS for the next year implies the company’s fundamentals will improve, the downside is its operating margins reveal poor profitability compared to other consumer discretionary companies.

Bark’s P/E ratio based on the next 12 months is 42.4x. At this valuation, there’s a lot of good news priced in - you can find better investment opportunities elsewhere.

Wall Street analysts have a consensus one-year price target of $2.33 on the company (compared to the current share price of $0.88).

Although the price target is bullish, readers should exercise caution because analysts tend to be overly optimistic. The firms they work for, often big banks, have relationships with companies that extend into fundraising, M&A advisory, and other rewarding business lines. As a result, they typically hesitate to say bad things for fear they will lose out. We at StockStory do not suffer from such conflicts of interest, so we’ll always tell it like it is.