We host our 1H22 Consumer Staples Themes call today at 2:30 PM ET.
We will outline our thesis for going long or overweighting the Consumer Staples sector.
Hedgeye's Macro team calls for either Quad 1 or shallow Quad 4 in Q1, followed by an increased likelihood of Quad 4 in Q2. Consumer Staples has the highest expected value of any sector in Quad 4. However, not all companies will enter Quad 4 with the same outlooks.
We see an inflection in margins ahead for the sector. Cost increases have become increasingly larger headwinds for margins in Consumer Staples. CPG companies are experiencing cost increases for everything from labor, packaging, food ingredients, and transportation. Peaks are generally processes, not points. Since food at home is a relatively small portion of CPI, we can have peak inflation while food prices continue to make new highs. Food manufacturing costs are peaking while price increases accelerate, signaling strengthening margins ahead.
We reshuffled our position monitor to account for international sales mix, exposure by commodity, pricing plans, the elasticity of demand, margin outlook, competitive dynamics, and secular growth trends. We added General Mills, Keurig Dr. Pepper, and Pilgrim's Pride to the long list. We added Anheuser Busch InBev for our shortlist and removed J.M. Smucker and Conagra.
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CLICK HERE for the live webcast and materials at the time of the event. |
DASH International M&A
DASH is looking harder to have an Intranational component to its GMV story - a net negative for the expense side of the equation.
An article in Manager magazine looks at DoorDash's ambitions in Germany looking to buy Flink. TechCrunch reported last month that Flink, the Berlin-based instant grocery startup, was valued at $2.85B after raising $750M in a round led by DoorDash. As a reminder, EQT AB agreed to sell its holdings in Wolt to DoorDash in an all-stock transaction valued at ~€7.0B. A few weeks ago, it was also rumored that DoorDash ended negotiations for a $400M investment in German grocery delivery app Gorillas.
WEN DEBT Raise
WEN Looking to pay a special dividend?
Wendy's (WEN) is trading higher after it said it was evaluating a potential debt raise within its securitized debt facility. If WEN proceeds with the transaction, it could be completed as early as the end of Q1 of 2022. WEN expects to use the net proceeds as per its capital allocation policy, including investments to support the growth of its brand or return of capital to shareholders via dividends and share repurchases. Due to the timing of this potential transaction, WEN revised the dates for reporting its Q4 and FY21 results.
