LW – Lamb Weston shares fell 25% last week, with the company's FQ3 results were disappointing. Two negative developments in the quarter: ERP-driven shipment declines and a slowdown in the QSR industry. Has the sector really slowed, or has the competitive intensity increased? Will capacity additions undermine pricing discipline in the industry? We will host a Black Book update on LW on Friday and seek to answer the questions. Lamb Weston moves to the top of our Best Idea Long list.
BRBR – BellRing Brands moves higher on the long list. Is a buyer waiting for BellRing Brands to stumble or just for the debt to be paid down before making a bid? Without manufacturing and any meaningful capex, the potential pool of buyers extends beyond beverage companies. Would a food company open up the grocery channel where it is currently underpenetrated.
COST – Costco moves down on the long list. Modeling the membership fee increase later than 2024 lowers the upside potential.
GO – Grocery Outlet moves lower on the long list. We are monitoring wage rates in the company’s California stores, with the $20 minimum wage increase going into effect for QSRs. Although only the QSR industry is mandated to pay higher rates, competing for labor should lead to pressure across other industries with non-skilled labor.
IFF – International Flavors & Fragrances moves lower on the Short Bias list. We are looking into the new CEO’s focus on operations and his track record at Syngenta. He has his work cut out for him, but expectations are low. The questions he received at CAGNY were almost hostile despite his recent arrival at the company.
Our updated position monitor:
