LW Black Book Today
We are hosting our Lamb Weston Black Book today at 12:30 PM ET.
The risk/reward is asymmetric. Lamb Weston is at its lowest valuation. Either the industry's long-term growth prospects are broken, and there is a structural change in its competitive intensity, or the shares are set up for a double.
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To view the webcast: CLICK HERE |
Our investment thesis for the presentation:
Beer continues to Outpace in FQ4 (STZ)
Constellation Brands reported FQ4 EPS of $2.26 vs. consensus expectations of $2.11.
The beer business grew 11%, with shipment growth of 10.5%, accelerating from 3.4% sequentially. Depletion growth of 8.9% benefited from the calendar by nearly 2%. Modelo's growth of 14% drove the growth, while Corona was up ~1%. Operating margins expanded by 30bps. Constellation Brands saw a low double-digit percentage gain in shelf space during the spring resets.
The wine and spirits business had a 6% sales decline driven by a 5% decline in shipments and depletions. Operating margins in the business contracted 220bps.
Management issued comparable EPS guidance of $13.50-13.80 for the next fiscal year, above consensus expectations of $13.43. Sales growth of 6-7% is expected to be comprised of 7-9% from the beer segment and flat growth in the wine segment. Management still expects demand growth to be challenged for wine, although the mix has improved with recent divestments. Margins in beer are expected to expand slightly, while the wine and spirits segment is expected to see a contraction.
If the cannabis industry saw a rescheduling, could the company extricate itself from the ill-fated Canopy partnership? Although management said a beverage alcohol consumer who drinks beer, spirits, and wine drinks six times more than a consumer who only drinks one – there are no synergies from a customer perspective.
Digital grocery (SFM)
Digital grocery sales were flat YOY in March. Grocery e-commerce sales have declined since the pandemic but are still 28% above March 2020. Pickup and delivery have both taken share from ship-to-home. Pickup sales represented 43.2% share in March, while delivery represented 39.1%. Pickup sales are the least costly digital method for grocers, but employees are still paid to do what customers do for free. Sprouts Farmers Market is seeing digital sales as a comp driver, and the introduction of Uber Eats will provide another sales boost this year.
