Idea Hunt (CLX, RGF)
We are hosting an Idea Hunt call for Restaurants and Consumer Staples on Wednesday at 2 PM ET. We are hunting for longs and shorts where our estimates differ materially from consensus expectations and where the multiple could be re-rated. We will present our analysis after a further round of vetting on a handful of companies. Our best ideas often are sourced from vetted Idea Hunt companies. Stay tuned to see whether we are leaning long or short on each company, our analysis, and our next steps in the research process.
Clorox (CLX) is a consumer and professional products manufacturer of a myriad of goods from cleaning supplies to food wraps and a lot of items in between. Clorox was a big winner during the pandemic and a long sufferer of the hangover. The market expects the company’s return to growth imminently. How much price is too much? What are the company’s organic growth prospects? What is priced into the shares? We will jump into the debate.
Real Good Foods (RGF) is a fast-growing, wellness-focused frozen food manufacturer. The brand is centered on high protein & low-carb – the future of healthy eating trends where organic growth trends are strongest. The company’s margins were under considerable pressure from input cost inflation in 2022. The combination of ingredient disinflation, price increases, and manufacturing efficiencies should see margins inflect in 2023. Real Good Foods is also an attractive asset to the larger food manufacturers that will be seeking growth once disinflation settles in. We will examine the different paths management can take to create value and what the challenges are. Is it just a matter of when?
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CLICK HERE at the time of the event for the webcast and materials. |
Spring arrives early down south (WMT, PRGO)
Spring leaf out continues to spread north arriving several days to weeks earlier than average in much of the Southeast. An earlier growing season is bad news for people with seasonal allergies. 70% of U.S. adult women report having spring allergies and 59% of adult men. A recent study reported that the North American pollen season has become 20 days longer since 1990. The darker shades of green in the spring bloom map below indicate an early spring while gray indicates an average spring. Parts of the Southeast, lower Midwest, and mid-Atlantic are seeing the earliest spring on record or one that occurs once every 40 years. The purple area indicates areas that are behind for spring. Parts of Arizona are seeing a spring that only occurs this late once every 40 years.
72% say it is not at all likely that they will consult with a healthcare professional according to a recent Morning Consult poll. Instead, 33% of allergy sufferers say chain pharmacies are their top source for allergy medicine while 25% say it is the big-box stores. 45% of respondents said they trust Benadryl the most, followed by 40% for Claritin, and 32% for Zyrtec. 40% of sufferers say they take medication for allergies several times a week. Perrigo manufactures a variety of OTC allergy medications.
Subscription coffee (BRCC)
Blank Street Coffee raised an additional $20M, adding to the $67M capital raised in 2021. The premium coffee chain has over 50 locations in New York, Washington D.C., Boston, and 15 in the U.K. The chain has a Regulars coffee subscription program for $12 per week that enables members to order coffee or tea every two hours while espresso and other drinks are available for an additional $1. The subscription business model was very much in vogue in recent years, peaking during the pandemic’s lockdown. If it drives traffic and loyalty it is still attractive and several chains have attempted to make it work. Black Rifle has shifted its focus from a bagged coffee subscription to wholesale distribution, but that is because it is underpenetrated in retail doors where the TAM is significantly larger.
Date set (PRGO)
Perrigo announced the new date for the FDA advisory committee meeting to review Opill will be on May 9-10. Opill’s approval would be the biggest source of EPS upside in 2024 and 2025, because it is not currently reflected. Last week we held a refresher Black Book on Perrigo and laid out the case for Opill.
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CLICK HERE for the PRGO webcast replay and materials. |
