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Shares fell this year, because many felt its food was too expensive. This morning, they reported disappointing same-store sales, a big sales miss and earnings miss, but shares jumped nearly 4% today. Why? The rally is broadening beyond tech/AI. Also, the street expected MCD's bad numbers, and they introduce $5 Value Meals.
They just reported their second heinous quarter in a row. Shares fell 30% the past week and 48% this year. It used to be a top packaged food company. Trouble began a year ago with the new weight-loss drugs taking off, so it impacted LW's french fries and other fast-potato foods. Their April report was a disaster and now earnings are down 40% year over year. That said, this is an opportunity. It trades at 12.5x forward PE. The great potato gut will come to an end eventually.
It has 480 locations across North America, Europe and Asia. They acquire small businesses in a very fragmented industry (cold storage) and quickly became the dominant player. They command scale and are riding the wave of online food sales. Also, the younger consumer wants healthy food, which cold storage protects. They've invested heavily in cloud and tech to operate more efficiently. Revenues jumped from $3.7 billion in 2021 to $5.34 billion in 2023, but their growth ground to a halt to start this year. Puzzling. Revenue was -0.4% YOY. Also, all these acquisitions have left them with a heavy debt. Pays an okay 2% dividend yield. It's the largest IPO so far this year, but is using most of the capital to pay down debt. Overall, he's modestly positive but wants to know where future growth is.
