PFGC issues shares
Last night Performance Food Group announced an 11.5M share offering with an additional 1.725M underwriter option. The offering will be nearly 13% dilutive. It wasn’t too many months ago when the company issued shares at $44.25 to finance the acquisition of Reinhart Foodservice, but that was when the world was quite different. Without any debt maturities until 2024, the timing surprised us, and we have been pretty concerned about restaurant distributors. Perhaps one can argue the multiple should be higher because the balance sheet is in a better position after the equity offering. Besides, the current share price is higher than where the shares were headed with leverage in the 4x ballpark and its customers facing a significant retrenchment. We’ll agree with the second part of that argument, and it certainly gives us some more conviction in our Sysco short thesis. For our full thoughts in our recent Sysco Blackbook presentation: CLICK HERE
French retail sales plummet
French retail sales fell 24% in March from February. The Bank of France sale food sales only fell by 0.9%. Small retailers had 5x the decline of the larger retailers in the first quarter. Supermarket sales grew 7.4% in the first quarter, while hypermarkets saw a 1.7% increase.
Local grocery sales continue to re-accelerate
The daily sales of local and independent grocers reported by Womply (a CRM provider) continue to suggest robust sales growth. Consumers stocked up on food in the middle of March, but have returned to grocers to replace the food that they have consumed. We contend that the calorie consumption shifts from food away from home to cooking at home is longer in duration than the market is currently discounting.
