Q&A call today (ACI)
We are hosting our monthly live Q&A call today at 10 AM ET.
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CLICK HERE for the webcast. |
We moved Albertsons several spots lower on our short list due to the rumors of an activist investor taking a stake in the company. Until it is substantiated we think it is appropriate to move it lower.
Our position monitor ahead of the call:
Summer-blend gasoline (KR, SFM)
The national average gas price is up 12% in the past month and 52% in the past year. Reuters reported that the Biden Administration is considering waiving rules requiring the sale of summer-blend gasoline that reduces smog. In the past, the rules were waived in order to deal with supply issues that occur during a hurricane or like events. The summer blend is more expensive and can add up to ten cents per gallon depending upon the market. The Administration has already waived the restriction on the sale of E15 gasoline blend during the summer, which has a very limited impact due to the small number of retailers capable of selling it. We have noted that consumers perceive price increases in groceries more than other categories, even when gasoline price increases are multiples of the price increase for food. That does not mean that consumers are not changing their behavior as gasoline prices continue to surge. In our Grocery Flash update call on Tuesday, we included the following slide showing that 18.5% of survey respondents said they were spending less on groceries due to higher gas prices. Consumers are changing their behavior and spending as they continue to cope with higher inflationary pressures.
Hamburger Helper sale (GIS)
General Mills announced an agreement to sell its Helper meals and Suddenly Salad side dishes businesses for $610M to Kelso’s Eagle Family Foods Group. The two businesses had revenue of $235M, representing a healthy price to sales multiple of 2.6x, slightly below General Mill’s EV/Sales multiple. Without considering the use of proceeds the sale will be $.10 to $.11 dilutive to EPS. In November, it was reported that General Mills was looking to sell a portfolio of brands including Helper and Progresso soup. General Mills has said it wanted to focus on higher-growth businesses. General Mills expects to close on the acquisition of TNT Crust, a frozen pizza crust maker with revenue of $100M, in the same quarter as the expected closing of the Helper and Suddenly Salad sale. General Mills is not done realigning its portfolio of brands in categories with more growth tailwinds as part of its Accelerate strategy. The businesses might not have been fast-growing, but the Helper brand is known for helping consumers stretch their food budgets. Apparently, the businesses had healthy margins or there are a lot of fixed costs that can not be shed with the sale. GIS is on our long list.
