The future is bright (STKL)
SunOpta reported Q1 EPS of $.01, in line with consensus expectations. Overall revenues were flat YOY. Plant-based revenue grew 12%, accelerating from 6.6% in Q4 with the plant expansions. Fruit-based revenue decreased 13% with a focus on margins while the strawberry crop was reduced.
Gross margins expanded 130bps with Fruit-based expanding 170bps and Plant-based contracting 40bps. Additional depreciation from the new factories weighed on Plant-based margins while customer rationalization in Fruit-based drove the expansion. SG&A grew 4.7% or $0.9M due to higher stock compensation and headcount. Inflationary pressures are a key concern in the market currently. SunOpta bears higher trucking costs in some cases. SunOpta is not immune to inflationary pressures, but cost-plus contract arrangements in Plant-based insulate it.
Management is guiding to 20% revenue growth in plant-based for the rest of the year. The $100M in capacity addition is still expected to be fully utilized by the end of 2022. Due to lead times for plant construction and ordering equipment, SunOpta will have to decide on additional capacity additions this year. Fruit-based revenues are expected to decline in the single digits for the balance of the year. EBITDA is expected to grow 50% in Q2 and “solid double digits” for the year's balance. Our estimates are ahead of the company’s guidance which has built-in conservatism. Leverage was 2.2x at the end of Q1, down from 10x a little over a year ago. The visibility of SunOpta's growth drivers and margins are not reflected in the current share price. We see over 100% upside as the company executes on new supply expansion.
(For our full thoughts, please see the separate note.)
Ahold’s U.S. margins revert (AD-AMS)
Ahold reported EPS of €0.54 vs. consensus of €0.48 driven by better sales and margins. In the U.S., comparable sales growth ex. Fuel was +1.7% while in Europe it was +8.3%. In the U.S., calendar shifts and the weather added 1.7 percentage points. Last March, SSS grew 33.8% in the U.S., while in Europe, SSS grew 15.9%. In Europe, comparable sales remained positive in March, with the continent lagging the U.S. in vaccines. The company’s two-year stacked comp is in the chart below. Online sales grew 188% in the U.S. (+135% excluding Fresh Direct acquisition, up from 129% in Q4) and 79% in Europe. U.S. operating margins contracted 180bps to 4.8% (pre-COVID levels) due to lapping the surge in sales last year without much of the associated costs of the pandemic. In Europe, operating margins expanded 60bps to 4.7%.
Management raised their EPS guidance for the year, with growth now expected to be in the low to mid-teen range compared to 2019 from mid to high single-digit growth previously. Management expects U.S. online sales to grow 70% in 2021, up from 60% previously, including the Fresh Direct acquisition. The operating margin outlook for 2021 of 4% remains the same. Management expects the CPI to be tied to PPI increases. Currently, management sees a CPI of 2.5% on the East coast.
The April CPI accelerates, but the food at home decelerates (KR)
The headline CPI for April increased 0.8% from March, the largest sequential gain since 2009. Compared to the prior year, CPI accelerated to 4.2%. The April CPI for food and beverages increased 2.3% YOY, decelerating from 3.4% in March. The food at home CPI increased 1.2%, decelerating from 3.3% in March. The food away from home CPI increased 3.8%, accelerating 10bps from March. The differential between food at home and away from home has grown 2.2% points to -2.6% as the food at home rate slowed. The increase for alcoholic beverages decelerated 10bps to 1.9% YOY. Inflation is a key concern, but in the near term, the CPI for food and beverages is decelerating against large pandemic-driven comparisons in the prior year.
