Publix laps the stockpiling with SSS growth, but margins contract (KR, ACI)
Publix Super Markets reported a SSS increase of 2.4% for the quarter ended March 27 compared to a 14.4% increase in the prior year. The company estimated that the pandemic impacted sales by $900M in Q1 of 2021 compared to $1B in Q1 2020. Gross margins contracted 30bps YOY due to a decrease in shrink benefits and volume efficiencies. Operating margins contracted 130bps YOY. EPS was $1.32 in Q1 2021 compared to $1.35 in the prior year. Conventional grocers benefited the most during the pandemic with the shift of food consumed away from home to food at home. Kroger and Albertsons are both on our short list. Both companies will face the same margin pressures that Publix reported.
Cinco de Mayo improved outlook (AVO)
For the four-week period ending Feb. 21, U.S. avocado volumes grew 8.8% while dollars increased 0.7%. The Northeast had a volume growth of 27.4%, according to the Hass Avocado board. The Northeast maintained a 14% share of total U.S. volumes. The New York region drove the Northeast with 29% growth. In 2020 total avocado volumes grew 6.1% in the U.S. to 2.64B pounds, despite the weakness in restaurants. Typically 30% of volumes are sold in the foodservice channel. There was some retail pricing deflation in 2020, with pricing in 2020 close to $1 per avocado compared to $1.15 in 2019.
Avocado volumes grew 21% over Halloween, while sales grew 8%. Over Christmas, volumes grew 17%, while the average price decreased 15%. For New Year’s Eve, volumes increased 35% while sales increased 19%. The outlook for Cinco de Mayo is much improved YOY.
Meatpackers enjoying healthy margins (TSN)
Beef cow slaughter during Q1 was the largest since 2010. That is after Q4’s slaughter was the largest since 2011. The trend has accelerated as the slaughter in March was the highest in any month since 2019. Last week’s slaughter was 48% higher than last year. The mix of heifers as a percent of the cattle at 37.7% on feed remains higher. Usually, the ratio of heifers on feed must decline to retain enough to increase the size of the herd. This suggests the herd size will continue to decrease. Even if there is some improvement in calves, there may not be enough to increase beef inventory. This is one of the impacts of higher feed prices from higher corn and soy prices.
Beef demand continues to be high, but the decrease in feeder prices suggests that packers do not have an issue sourcing supply. Feeder prices fell from $1 to $2 last week. The spread between cash cattle and wholesale beef prices has continued to widen to historic levels. The USDA price for choice boxed beef was $298 per cwt., up to $12 from last week and $20 two weeks ago. Beef packers are enjoying very large margins at present. For example, retail ground beef prices were up 4% in March, according to ERS/USDA data. Wholesale prices are currently down significantly YOY due to the pandemic comparison.
