Grocery sales take a hit (SFM)
Daily spending at local grocery stores, as reported by Womply (a CRM provider), took a hit at the end of May. Sales on May 31 were down 10% YOY. Protests around the country were likely a contributing factor.
Bodegas see robust beer sales over Memorial Day weekend (STZ)
When explaining the difference between IRI POS sales results and actual results, Constellation Brands said one of the factors was that "IRI over-indexes to chain large format stores" and "under-indexes to independent markets, such as New York and New Jersey."
National Retail Solutions operates one of the largest POS networks for inner-city, neighborhood convenience stores. It monitored beer sales in markets with a stay at home restrictions like NYC, L.A., San Francisco-Oakland-San Jose, Detroit, and Philadelphia the week of Memorial Day (5/22-29). In aggregate, beer sales for the Memorial day period increased by 28.6% YOY in the tracked bodegas. This compares to the overall sales growth of 16.3% for non-beer sales over the same period. Bodegas in California had the fastest growth rate of over 50%. Modelo Especial had the highest YOY dollar growth of 32%, followed by Pacifico, Bud Light, Modelo Chelada, and Michelob Ultra. Beer led all other categories in dollar growth, followed by other alcoholic beverages, mixers, and tobacco products. The top items purchased along with beer were lottery tickets, Coca-Cola, Marlboro and Newport cigarettes, Red Bull, Poland Spring water, and Doritos.
Smuckers lowers forward year guidance; adding to short bias list
J.M. Smucker reported Q4 EPS of $2.57, beating consensus by $.29. Sales grew 10%, driven entirely by consumer demand from COVID-19. Consumer takeaway in March increased 40% across the company's portfolio with consumer foods growth of 72%, coffee growth of 37%, and pet growth of 20%. In April, elevated demand continued in the coffee and consumer foods businesses, but pets reversed as consumers depleted their stockpiles. The company's away from home business declined 50% in April.
Management said, "Over 1 million new households tried the Folgers, Dunkin', or Cafe Bustelo brands in the quarter with 75% of those households purchasing Folgers for the first time during the last 12 months." The comment illustrates two consumer trends we have seen during the pandemic, the extent of customer trial, and the return to familiar brands.
Management issued forward year EPS guidance of $7.90-8.30, below consensus expectations of $8.46 and F2020 EPS of $8.76. The unfavorable impact from COVID-19 is estimated to be $1.00 in EPS in F21. Sales are expected to decline 1-2% due to a 4% headwind from lapping incremental sales from COVID-19 in FQ4 and a drop in the away from home business from COVID-19.
We are adding SJM to our short bias list due to our concerns about a portfolio consisting of many brands without much resonance with consumers, the brands' ability to grow organically, competitive pressures in the pet category, ongoing headwinds in the away from home business, the potential for dilution from several new managers at the C level, and contracting gross margins this year.
