Adding SAM to the Short Bias List
As part of our deep dive into the hard seltzer category we are adding Samuel Adams to our Short Bias List. Samuel Adams is currently the one public vehicle in which to invest in for the growth in the hard seltzer category. We will announce our event details separately.
Our updated position monitor reflects the new addition:
Ahold Delhaize Q2 performance in US lags KR & ACI
Ahold Delhaize reported EPS of €.65, up 87% YOY, driven by a SSS increase of 15.9%. US comps increased 20.6% and European comps increased 10.2%. Management believes US grocery outpaced Europe, because the pandemic was worse in the US and the share of eating away from home is greater. In the US all brands comped up double digits, but Food Lion outperformed the other banners including Giant, Hannaford, and Stop & Shop. When adjusting for the comparison with last year’s strike at Stop & Shop which had a -3.2% impact, the US division slightly underperformed Albertsons and Kroger (adjusting calendar reporting periods). Online sales were 9.7% of overall sales with US online sales increasing 127% and European online sales increasing 64%. In the Northeast where most of the stores are based CPI was 5.1%, accelerating from 1.5% in Q1. Management did not provide an update on July sales trends beyond saying it was off to a strong start.
Operating margins expanded 170bps to 5.3% with the US division expanding 250bps to 6.0% and the European division expanding 20bps to 4.5%. Lapping the strike was an 80bps tailwind in the US. Management said in-stock levels were back to normal in Europe and improved in the US, with the latter still seeing constraints in certain categories. Management expects promotions to rise in the 2H, but to still be lower YOY. Management raised their outlook for operating margins to be up YOY and for EPS to now grow low to mid 20% from MSD% previously.
Mexican beer rebounding in July (STZ, BUD, HEIA-AMS)
Ingredion, a supplier to food manufacturers as well as brewers, reported earnings on August 4. The company’s results were negatively impacted by declines in the food away from home sector as well as the government mandated shutdowns of beer manufacturing in Mexico. Ingredion expected the shutdown to be lifted by the end of May, but “they continued pretty much through the entire quarter, which was very surprising for us.” The CEO also said, “Brewing’s steep decline pressured net sales for Mexico in the quarter and while June and July sales to brewing in Mexico have picked up substantially, recovery of our overall volumes to prior year levels has not yet developed.” Ingredion’s CEO said the sales improvement has continued into July. “The government mandated brewing shutdowns [in Mexico] hit us very acutely because those breweries were just shut down and could not operate. Now, that’s been lifted and we’re seeing the volume… coming back very shortly, with July up, even versus the prior year.” Earlier in the week Heineken expressed more caution on Q3 trends in Mexico noting that the end of Q2 had the benefit of restocking.
