fait accompli (BYND)
No surprise, the BYND numbers are a disaster. Reported 3Q21 EPS ($0.87) vs FS ($0.37); Revenue $106.4M vs FS $109.2M; Adjusted EBITDA ($36.8M) vs FS ($12.2M). Guidance is for more of the same in 4Q21As a result, the; Revenue is $85M-$110M vs. FS $130.5M. Looking at a breakdown of 3Q21 revenues US Retail $52.4M vs. FS $72.0M and International $21.4M vs. FS $21.0M; Foodservice $32.7M vs. SA $35.4M and US foodservice $15.1M, with International $17.5M. Gross margin missed by 820bps (21.6% vs FS 29.8%); Adjusted EBITDA margin (34.5%) vs FS (12.1%). Embedded in the 4Q21 guidance are management's expectations of a moderation in sales growth across all channels as a result of:
- The company's 4Q21 contains five fewer shipping days versus last year
- Impacts associated with knock-on effects from operational challenges in Q3 of 2021 (huh?)
- Ongoing operator challenges related to labor issues as well as general caution among customers based on COVID-19-related uncertainty.
- Accelerated orders in 3Q21 that would otherwise have been expected to materialize in 4Q21 ( in conflict with the excuses given in the pre-release?.)
Our spin on the operational challenges and critical to our short thesis is the lack of demand for the BYND product. At the end of 3Q21, the BYND product was sold in over the 39,000 food services doors. However, last quarter those operators sold on average $140 (down 40% sequentially) a month of BYND products or about $5 per day. So there is just no evidence that there is any sustainable demand for a BYND burger or chicken.
We think the stock will ultimately settle in around $50. But, unfortunately, this news will also make it difficult for Impossible to go public.
RRGB MIsses
RRGB reports 3Q21 (A)EBITDA $8.3M missing FS $11.5M with revenue below, but comps +34.3% beat FS +33.8% with traffic +22.5% and average check +11.8%. Restaurant margin missed by (310bps) with the cost of sales (20bps) lower than expected. Expects FY21 commodity and wage inflation +MSD with SG&A of $120-$130M; reaffirms CAPEX $45-$55M including continued investment in Donatos expansion to ~120 restaurants. Amends credit agreement: increases the pricing under the Credit Facility and reduces the aggregate revolving commitment to $75.0M.
Sales & FOOD INFLATION
Is Halloween to blame for slower sales trends? Black Box data for the week ending October 31, 2021, saw Restaurant sales and traffic saw a sharp decline in growth, most likely due to the Halloween holiday falling on a Sunday (weekdays have less of an impact). All industry segments posted a drop in sales, with casual dining and upscale casual hurt the most by lost dinner sales due to a lost Sunday. All U.S. regions are still seeing positive sales growth, albeit at a slower pace. The regions with the best sales growth were Western, Florida, Mountain Plains, and the Southeast. The weakest regions were New York-New Jersey, New England, Mid-Atlantic, and the Midwest. Food at home inflation in October accelerated to 5.4% YOY from 4.5% in September. Food away from home inflation accelerated to 5.3% YOY from 4.7% in September. The differential between food at home and away from home narrowed to 0.1%. It has been a year since the inflation rate for food at home exceeds the rate away from home. While the differential has disappeared between on-premise and off-premise, the overall rate of inflation is high.
