Call Today | SHARKNINJA SPIN-OFF (SN)
JS Global (HK:1691) has announced plans to spin off 100% of SharkNinja, a household products company based in the U.S. & EU. JS Global shareholders will receive one share of Shark Ninja for every 25 shares held in the company as of the record date of July 4, 2023. SharkNinja is anticipated to trade under the ticker SN on the New York Stock Exchange by the end of the month. The company is splitting to enhance growth in both regions, not for balance sheet reasons.
Revenue has grown at a 26% CAGR between 2018 through 2022 to $3.7B. Today, the company operates in 26 markets and has expanded into 27 sub-categories. The Shark brand, which has a focus on household cleaning supplies, operates in 11 total sub-categories and had $2B in sales in 2022. Shark was the number 1 selling vacuum brand in the U.S. for the past four years. The Ninja brand, which has a focus on household kitchen appliances, operates in 16 total sub-categories and had $1.7B in sales in 2022. Ninja was the number 1 small kitchen appliance brand in the U.S. for the past three years.
We are modeling a continued inflection in margins this year compared to a surge in costs last year that has subsided. We are also modeling a reacceleration in sales driven by the company’s innovation engine, further share gains in existing categories, and new product launches. Our model suggests SharkNinja will begin trading below 10x EPS.
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Our key conclusions:
Digital grocery shopping (WMT)
The Brick Meets Click survey reported a slight sequential increase in online grocery shoppers in June. According to the survey online grocery sales decreased 1.2% in June. Overall spending on groceries online fell 230bps to 11.9% of grocery spending in June. Monthly active users increased slightly more than 1% while the average order value increased by 3%. The average number of orders decreased by 5%. Pickup sales increased 3.2% YOY and comprised 49% of all e-commerce grocery sales. Delivery sales decreased by 2.5% with the average number of users decreasing by 5% and the average order value increasing by 7%. Ship-to-home customers decreased by 9.7%. Food at home inflation was 4.7% in June, showing online grocery sales lagging behind inflation. While online grocery provides a convenience for customers it is generally more expensive. Like most sectors online, the largest wins a disproportionate share and Walmart is leading in digital grocery.
Governance changes (STZ)
Constellation Brands announced the election of two new directors, Luca Zaramella, CFO of Mondelez and Bill Giles, former CFO of AutoZone. Constellation Brands also entered into information sharing and cooperation agreements with Elliott Management, one of its largest shareholders. Elliott Management has been in constructive discussions with the company for several months to enact the governance changes. Constellation Brands also announced an investor day later this year.
It is notable that these governance changes would not have happened with the dual share classes. It was just two weeks ago that Chairman Rob Sands announced he would step down as Chairman. Elliott Management said two notable things in the press release – “the company’s meaningful growth potential, powered by its premier Mexican beer portfolio, is not currently reflected in the company’s stock price.” And “to deliver that value to shareholders through strong commercial execution and focused capital allocation.” We agree with both comments. We also speculate whether Bill Giles will be a proponent for a more aggressive share repurchase program like AutoZone had during his tenure.
