NOMD’s raised guidance is just the first, more to follow
Nomad Foods reported an EPS of €.33 vs. a consensus of €.29. Organic revenue growth was 7.7% with volume/mix up 6.3% and price up 1.4%. Management raised EPS guidance for the year from €1.19-1.21 to €1.24-1.27 and EBITDA guidance from €440-445M to €450-460M. Organic revenue growth is now expected to be up MSD% for the year from +LSD% previously reflecting the upside in Q1 and trends continuing in Q2 while maintaining +LSD% expectations for the 2H.
The vast majority of companies have pulled guidance for the year due to the lack of visibility from the pandemic. So only raising guidance for the upside in Q1 and trends in Q2 is not an issue in our minds. The company provided the weekly sell-out trends at retail, which point to elevated consumption in April rather than stockpiling, which appears to be concentrated in the two weeks in March, as seen in the following chart.
While deceleration from the +30% growth trends following the stockpiling in mid-March should be expected, the most recent week reported was negatively impacted by Easter. Even January sales trends, which management expected to be negative due to timing shifts, had positive organic growth except for one week.
Most companies have also canceled share repurchases during the pandemic while Nomad Foods announced a new authorization. The company repurchased $91M of shares at $16.78 near the end of Q1. The contrast in guidance, share repurchases, and visible organic growth are strong arguments for a re-rating of the shares.
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Ahold Delhaize (AD-NL) points to more substantial changes in US grocery spend than in Europe
Ahold Delhaize, one of the largest food retailers in the world, reported SSS ex-gasoline of 13.8% in the US and 9.8% in Europe. Online sales grew by 37.7%. In the US, Jan. and Feb. comps grew 1.7% while Mar. Comps grew 33.8%. US operating margins expanded 170bps to 6.7%. In Europe, Jan. and Feb. comps grew 4.9% while March comps grew 15.9%. European operating margins expanded 10bps to 4.1%. Management said in stock levels are nearly back to normal in Europe, but there are a number of supply chain challenges in the US. There are shortages in sanitization products, paper, baking, but the biggest at the moment is protein – poultry, pork, and beef. In Europe, there isn’t a protein supply chain problem. Management said that because the food away from home has a lower share in Europe than in the US, the shift to grocery spending was less pronounced. In April, sales in Europe have normalized, but in the US, management has been “positively surprised by how strong the sales continue to be.” The company expects margins to be lower in the rest of the year due to a more extended period of higher costs combined with less sales leverage than in Q1.
BUD better than feared
Anheuser-Busch InBev reported a $.06 more substantial loss per share than expected, but revenue trends were better than feared. Revenue decreased by 5.8%, while volumes decreased by 9.3%. Revenue per hectoliter (hl) increased by 3.9%. Volume growth of 1.9% in the first two months of the quarter, excluding China, ended down 3.6%. China volumes decreased by 17% in April compared to -46.5% in Q1. Overall, April volumes decreased by 32%.
EBITDA decreased 13.7%, and margins contracted 330bps. US net revenues grew 1.9%, EBITDA grew 2.7%, and revenue per hl grew 3%. In the US, the growth in off-premise can largely offset the lost on-premise business, which will improve sequentially from April. This is because the US business has one of the lower on-premise channel mixes. Revenues in Mexico grew DD%. Q2 is expected to have a larger negative impact from COVID-19 due to a third of sales in the on-premise channel. The channel mix is dramatically different by country, as seen in the following chart. Besides Mexico, beer operations are also shut down in South Africa and Peru.
