Q1 Preview (BRCC)
Black Rifle Coffee Company reports the first quarter of 2022 results on Thursday. It will be the second earnings report by the company since going public. The guidance management provided in the last call established expectations for revenue of $315M, positive adjusted EBITDA and 15-20 new Outposts. The company is experiencing inflationary pressures like everyone else and had already started raising prices on numerous products. However, management had not yet decided to change the price on the bagged coffee subscriptions. Much of the growth this year is expected to be driven by RTD door expansion. Management has already been positively surprised by customers rolling out Black Rifle RTDs across their entire fleet rather than being deployed in small or regional tests in the beginning. The early success of RTDs provides top-line visibility for the year and if inflationary costs continue to climb management has pricing levers to use.
Position Monitor Changes
We made some adjustments to the order of the longs in our position monitor reflecting stock price changes, visibility in near-term results, and our conviction level. At the top of our list are companies that are passing on price increases to offset moderate cost pressure relative to peers. Lower on our list are companies with margin inflections one to two quarters behind.
Alcohol imports accelerate (STZ)
Total beverage alcohol imports grew 22% over the 12 months ended March. Over the last three months imports grew 18%, accelerating from the 15% growth in the three months ended February.
- Imported beer grew 11% by volume and 13% by value over the last 12 months. Over the last three months beer imports grew 10% by volume and 12% by value, accelerating from 4% growth by volume and 6% by value in the three months ended February. 78% of imported beer comes from Mexico. Constellation Brands represents a majority of Mexican beer imports and 60% of imported beer.
- Imported packaged wine for the last 12 months grew 30% by value. Over the last three months volumes decreased 10% and by value grew 8%. That represents an acceleration from a 4% decline by volume and 7% growth by value in the three months ended February.
- Imported packaged spirits grew 28% by value over the last 12 months. Over the last three months volumes grew 16% and by value grew 33%. That compares to 14% volume growth and 34% value growth over the three months ended February.
Exported beer grew 22% by value over the last 12 months. Over the last three months exported beer decreased 3% by volume and value. Exported packaged wine grew 5% by volume and 20% by value over the last three months. Constellation Brands has been the principal share gainer this year.
The worsening shortage of baby formula (PRGO)
The nationwide shortage of baby formula is worsening. 40% of retail locations are out of stock for the week ending April 24 according to Datasembly, which tracks 11,000 stores. Out of stocks were at 31% in early April and 23% in January. The CEO of Datasembly said, “We’ve been tracking it over time and it’s going up dramatically. We see this category is being affected by economic conditions more dramatically than others.” Perrigo produces store brand infant formula comparable to Ensure, PediaSure, Pedialyte, and Similac. The category represents ~15% of sales. Since Perrigo manufactures the store labels, it is the beneficiary of trade down or any cost saving measures by consumers.
