SunOpta Black Book Presentation today (STKL)
We are hosting a review of SunOpta’s analyst day today at 12:30 PM ET. Our presentation will illustrate the secular growth drivers in plant-based milk, SunOpta’s competitive advantages, and chronicle the growth investments. We will outline in detail the plans for EBITDA to grow 100% from 2022 to 2025. Finally, we will chart the path for the share price doubling from here. Our investment themes:
We are raising SunOpta higher on our position monitor as well as Grocery Outlet:
What price elasticity? (CPB)
Campbell Soup reported a $.09 beat for FQ3 EPS, but maintained guidance for the year. Campbell Soup reported organic revenue growth of 9%, accelerating from a 2% decline sequentially after the second wave of price increases was implemented. Net pricing accelerated from 6% in FQ2 to 11% in FQ3. Sales were 5% ahead of consumption trends as retailers rebuilt inventory levels. The Snacks business had organic sales growth of 8% with consumption at +4%, accelerating from -3% and +1% in FQ2 respectively, with particular strength in salty snacks. Snyder’s grew 9%, Cape Cod grew 10%, Kettle Chips grew 17%, Late July decreased 16%, and Pretzel Chips grew 3%.
In anticipation of further inflationary pressures in ingredients, packaging, freight, and labor management has already announced the third wave of pricing actions. The core inflation rate accelerated from 9% in FQ2 to 15% in FQ3.
Gross margins expanded 90bps in FQ3, improving sequentially from 340bps of contraction. Net price realization was an 800bps tailwind and productivity improvements of 110bps offset by 50bps of volume/mix headwinds and inflation of 790bps. The headwind from volume/mix was 170bps in Q2 while net price realization was a 480bps tailwind, demonstrating a smaller price elasticity impact sequentially. Adjusted EBIT margins expanded 190bps. Management raised the organic sales guidance from -1% to +1 to +1% to +2% due to additional pricing and YTD performance. The EPS guidance for -4% to flat YOY was maintained. Although management did not revise EPS guidance the underlying inflection in margins from price increases without the price elasticity offset sets the company up for upside going forward. Campbell was more aggressive with pricing, so it has seen the inflection in margins a quarter ahead of many of its peers.
Flat sequentially in NY & NJ (VLGEA)
Village Super Market reported sales growth of 4.3% for the quarter ended April 30 with SSS growth of 4.6%. SSS were similar to the preceding quarter of 4.4%. SSS growth was primarily driven by growth in the New York City stores, inflation, and continued growth in SNAP redemptions. Same store digital sales were flat. Center store sales increased 3.8%, fresh sales increased 5.6%, and pharmacy sales increased 3.1%. Gross margins expanded 48bps, driven by departmental gross margin percentages. Management expects SSS to increase 3.25% to 4.25% for the year.
The company is the second-largest member of the Wakefern Food Corporation, the largest retailer-owned food cooperative and owner of the ShopRite, Fairway Market, and Gourmet Garage banners. Village Super Market operates 29 ShopRites, five Fairway Markets, and four Gourmet Garages in NJ, NY, PA, and MD. Despite the accelerating food inflation SSS trends were flat sequentially. The food retailers have not resorted to promotions to drive sales yet.
