1. Sysco lends Kroger its employees
Sysco and Kroger agreed to let Sysco’s furloughed employees work at specific Kroger distribution centers for 30 days or more. Sysco would be responsible for the employees’ compensation and benefits. One of the unintended consequences of the Cares Act may be the extra $600 of unemployment insurance discouraging laid-off workers from seeking new employment in the near term. Many of the food retailers are scrambling to adjust to additional demand, while millions have filed for unemployment. It will be interesting to see how many Sysco employees join Kroger in its effort to re-stock its shelves.
2. Performance Food Group conserves cash
Following Sysco’s announcement, Performance Food Group announced several new partnerships and actions on Monday. PFGC signed agreements with ten new grocery retail partners to share over 1,000 employees. It’s a creative move to find a short-term solution for the company’s suddenly under-employed workers. The company also drew $400mm from its credit facility and halted spending cash on non-essential Capex and share repurchases. It is time to batten down the hatches for the storm.
3. Cal-Maine’s current quarter inflects
Cal-Maine reported a 10% sales to decrease in the quarter ended February 29 due to egg prices falling 10% YOY. Management said since the end of the quarter egg, “prices have moved significantly higher to record levels.” Hen numbers as of March 23 are 11.8% lower to 330 million. Farm production costs were 1.6% lower, reflecting a 3.6% decrease in feed prices. With corn prices likely pressured in part by the coronavirus and hen numbers lower, the near-term outlook has inflected for the company.
