We are hosting our monthly Restaurants & Consumer Staples Q&A call today at 12:30 PM ET.
Where do all the sinks come from? (SAM)
Boston Beer reported a Q1 loss of $.16 per share, widely missing consensus of $2.25 due to lower revenue and margins. Revenue decreased 21.1%, missing expectations by 4%. Depletions decreased 7% while shipments decreased 25.1% compared to -15% and -24.5% respectively in Q4. Management believes inventory levels at five weeks on hand is at appropriate levels, so depletions and shipments should be in line going forward. Gross margins contracted 560bps due to supply chain problems and material costs.
Management reiterated their EPS guidance of $11-16 vs. consensus of $14.05. The guidance expects depletions and shipments to increase 4-10% while price increases are expected to be 3-5%. Management noted that YTD depletions through April 16 decreased 6% YOY while shipments decreased 23%. The guidance implies depletions would increase 10% for the remaining nine months of 2021.
For several quarters in a row it seems like management has kitchen sinked results making for easy comparisons, but guidance has been too optimistic. Comparisons are very easy, but we are below management’s expectations for depletions this year. We remain on the sidelines.
Return to the office (KR)
According to Kastle Office Systems, the average office occupancy rate of its top ten cities in the U.S. was 42.8% for the week ended April 13, down 30bps from the prior week. Door swipes improved in half the cities sequentially. The three Texas cities have seen their occupancy rates resume an upward climb. All three cities are above 50%. Law offices now have an occupancy rate above 70%. By the end of June, most organizations polled by Gartner will have opened their worksites. A GoodHire survey showed that 77% of managers would take action, whether it was reducing pay, losing promotion opportunities or firing them, if workers refuse to return to the office. The Gartner survey showed that as many as 40% of workers would leave their job if they were not allowed to work remotely. So many companies have acknowledged the change by allowing some sort of hybrid schedule. The Texas cities likely reflect what the new ceiling is for returning to the office for the other major cities early in the post-pandemic recovery.
Tasting room recovery (VWE, NAPA)
Tasting rooms will be one of the strongest channels for wineries this year compared to numerous restrictions in California last year. In March, tasting room sales increased 120% in Napa, 72% in Sonoma, and 49.7% in the Central Coast as seen in the chart below. Overall DTC sales in over 400 tasting rooms tracked by Community Benchmark in California and Washington increased 15.4% in March. Visitation increased 38.2%, tasting room sales increased 56.7%, and wine club sales increased 12.7%. That compares to visitation growth of 78.9% in February, tasting sales growth of 91.1%, and wine club sales growth of 10.8%. DTC will be the strongest channel of growth for many wineries this year, but the sales mix can differ greatly between companies.
