Mathews 2Q 2020: Improved pricing for caskets and memorial products. . . but, lower unit sales

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Last week Matthews International, a publicly traded company with a segment of its business in the death care realm reported 2nd Quarter 2020 results.  According to a press release you can read here, due to their international operations, the company believes their business units began experiencing the impacts of COVID-19 earlier in the quarter, initially in their Asian and European markets.

As an entire company, Matthews reported a sales decline of 4.2% with sales in Q2 2020 of $374.8 million as compared with sales in Q2 of 2019 of $391.4 million.  Their Memorialization segment, which includes their Aurora Casket brand,  fared somewhat better with 2020 sales virtually identical to the same quarter in 2019.  Memorialization segment sales for 2Q 2020 were $161.8 million as compared to $162.1 million in 2Q 2019.

In an earnings call transcript which you can see here, Matthews CFO Steven Nicola had this to say of the Memorialization segment, “Higher cremation equipment sales and improved price realization for caskets and memorial products were offset by the impact of lower unit sales volumes for caskets and memorial products.”

And in the company Earnings press release this was stated about the Memorialization segment, ” Improved price realization on memorial products and caskets, increased sales of cremation equipment, and higher unit volumes of U.S. memorial products were offset by lower casket unit volumes, a decrease in international memorial product sales and lower mausoleum sales.  International memorial product sales and mausoleum sales were unfavorably impacted by COVID-19.”

The following was stated by company CEO Joseph Bartolacci in the press release, “In the Memorialization segment, overall demand has been strong for caskets and cremation equipment but has recently declined for memorial products as families refrain from going to cemeteries to meet with counselors to order their markers. “

Funeral Director Daily take:  From our point of view, we think that these sales numbers for the Memorialization segment are pretty good considering that marker sales are a portion of the sales total.  And, it is totally understandable that in this COVID-19 environment families are reluctant to go to a cemetery, funeral home, or have a home visitor make a sales call to their home in this time period.

While the pandemic may cause funeral homes to lose revenue forever on what might have been spent on a funeral service or memorial service, in Matthews case, many of these cemetery product sales may not be lost, but just delayed.  We would guess that if a family intended to buy some type of marker for a loved one, they will still do so, but will wait until the sales situation is more conducive.  That potential “pent-up” demand may very well lead to increased sales in succeeding quarters.

Another interesting item, and potentially cost savings feature for Matthews, we noticed from the earnings call was the realization by Matthews management that they spend a significant amount of money on real estate – partly for offices – around the world.  It appears that management is learning that many of their employees may be just as productive working from home which may allow the company to see if it can save some of this real estate expense by moving to a modified virtual basis going forward.

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