Restaurants
Portillo's - The Best Of Chicago
We are hosting a pre-IPO call today at 2 PM ET.
Portillo's, a fast-casual restaurant chain known for its Chicago-style hot dogs, announced terms for its IPO. Founded in 1963, the Oak Brook, IL-based company plans to raise $375 million by offering 20.3 million shares at a price range of $17 to $20. Portillo's is looking for a market value of $1.3 billion at the midpoint of the proposed range. Portillo's serves "iconic" Chicago street food through multichannel restaurants, serving a diverse menu that includes Chicago-style hot dogs and sausages, Italian beef sandwiches, and chopped salads, among other offerings. Nearly all of its restaurants have double-lane drive-thrus and a layout that accommodates a variety of access modes, including dine-in, carryout/curbside, delivery, and catering. Currently, Portillo owns and operates 67 restaurants across nine states, and each location served, doing about $8.4M in average unit volumes. Portillo's generated $496 million in sales for the 12 months ended June 2021. It plans to list on the Nasdaq under the symbol PTLO.
We hope you can join us.
BENTO BOX
Fiserv (FISV) to acquire BentoBox, a digital marketing and commerce platform provider that delivers a frictionless diner experience dedicated to accelerating growth and helping restaurants seamlessly connect with their guests. The financial terms of the transaction remain undisclosed. This transaction expands the company's Clover dining solutions and industry-leading commerce and business management capabilities, enabling ~200K restaurants of all sizes to deliver unique and differentiating diner experiences, from quick and casual to full service. "The addition of BentoBox's premier website capabilities to the business management solutions of Fiserv will strengthen our omnichannel platform, providing restaurants of all sizes and types with an integrated offering that delivers a customizable consumer experience," president & C.E.O. Frank Bisignano commented. BentoBox enables 7.5K+ restaurant concepts across 14K locations; it helps restaurants generate new revenue streams and create differentiated customer experiences. The transaction is expected to close in Q4.
Consumer Staples
Was Delta the peak? (ACI)
Albertsons reported FQ2 EPS of $.64, above consensus expectations of $.45, reflecting better sales and SG&A expenses. ID sales of 1.5% were above consensus expectations of -1.2%. In addition, digital sales grew 5% against difficult compares as the industry had recently seen declines. However, driving Albertsons' growth is the continued rollout of digital across its store base.
Gross margins were flat excluding fuel and up 85bps compared to Q2 of 2019. Higher product, supply chain, and advertising costs were offset by productivity initiatives, favorable mix, and pharmacy margins from the COVID-19 vaccine. The company's brand penetration increased 60bps YOY to 25.2%, even with Q1. Management said digital initiatives would become an increasing focus which has a dilutive impact on margins, unlike private label initiatives. Product inflation during the quarter was 3%. The LIFO expense was flat with Q1. SG&A as a percentage of sales was flat YOY, but excluding fuel was 55bps higher. Lower pandemic expenses partially offset higher employee costs, depreciation, and digital expenses.
Management raised EPS guidance for the year to $2.50-2.60 from $2.20-2.30. In addition, ID sales guidance was raised to -2.5 to -3.5% from -5 to -6%. After the upside in Q2, the $.11 of raised guidance seems to only account for the continued trend in sales in Q3 to date. As long as sales remain on the current (Delta variant) trend upside will continue.
We are hosting a Black Book on the grocers and the post-pandemic outlook on Thursday at 2 PM ET. Is there a post-pandemic? We will provide our answer. To add to your calendar, CLICK HERE.
IPO Pipeline
After a slowdown in August, the IPO pipeline is filling up again. The share price performance of the IPOs has recently improved, as seen in the chart below. There are two Consumer Staples companies going public this week. The Vita Coco Company is seeking a $224M offering. Our concern is the visibility in future demand for the core coconut water segment. Winc is seeking a $75M offering. Our concerns for Winc include the steep valuation, the customer turnover, and associated CAC, as well as not being familiar with the company's strategy to grow demand anniversary the pandemic. Portillo's is also going public this week and is the company we are most looking forward to covering in the future.
Truck rates continue to climb (UTZ)
Freight rates in September showed continued strength and tight available capacity, according to the latest monthly update from DAT Analytics. The DAT truckload volume index was down 1% from August and the highest for September. Typically volumes decline 7 to 10% from August to September. Businesses are increasingly shipping early and, where possible, by truck to ensure timeliness adding to the demand. The national average rate for van freight on DAT's network increased 3.3% from August to $2.85 per mile in September, up 20% YOY. The average rate for reefer trucks was up 26.5% YOY. According to DAT, the national average spot van rate was equal to the average contract rate in September. The national average price of on-highway diesel increased from $.03 to $3.38 per gallon, the sixth straight month of increases.
DAT expects truckload pricing to remain elevated into the first quarter of 2022, followed by a market correction sometime in the first or second quarter. The correction is not expected to be a freight recession but a return to typical growth rates and distribution patterns. Freight rates continue to be a headwind for CPG companies, including Utz Brands. As a result, higher rates are reflected in 2021 estimates, but 2022 is still to be determined.
