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4 Reasons Why B&G Foods is Set to Keep its Robust Show On

Zacks Equity Research

B&G Foods, Inc. BGS appears to be in solid shape, thanks to consumers’ rising demand amid the coronavirus-led increased at-home consumption and pantry-loading trends. Encouragingly, management expects sales to remain elevated, as it anticipates the pandemic-led increased stay-at-home, work-from-home and cook-at-home trends to stay.

Many other food companies like Flowers Foods FLO and General Mills GIS are gaining on increased pandemic-induced demand. Meanwhile, B&G Foods is also benefiting from its lucrative buyouts, online sales and pricing strategies. Let’s delve deeper into the factors that are likely to continue fueling growth for B&G Foods.

Burgeoning Demand Aids

Rising demand aided B&G Foods’ performance in second-quarter 2020, wherein both top and bottom lines surged year over year and the latter marked its second consecutive beat. Results were backed by solid pricing and gains from buyouts along with increased demand led by the COVID-19 outbreak. Notably, the company’s 85% of brands witnessed sales growth, including Green Giant, Cream of Wheat, Ortega, McCann’s, Victoria and Clabber Girl, among others. The company has been witnessing a rapid increase in demand for its products since the second half of March 2020, thanks to the coronavirus-led stockpiling and higher at-home consumption.

Markedly, net sales surged more than 60% in April, about 50% in May and 10% in June. In this regard, B&G Foods’ higher net sales to mass merchants, warehouse clubs, supermarkets, wholesalers and e-commerce consumers have more than offset lower demand from foodservice clients. Solid retail consumption continued to be a major driver in the second quarter. As reported by Nielsen, consumption for B&G Foods’ total portfolio jumped 34.5% for the 13-week period ended Jun 27. B&G Foods anticipates net sales and adjusted EBITDA for fiscal 2020 to significantly exceed the guidance provided in February.

Yielding Buyouts

The company has been receiving favorable contributions from its acquisitions. To this end, the company recently acquired Farmwise (in February 2020), while it also acquired and integrated retail baking powder maker, Clabber Girl (acquired in May 2019). Incidentally, Farmwise and Clabber Girl made contributions of $0.6 million and $15 million, respectively, to B&G Foods’ second-quarter top line. Apart from this, the company has acquired notable brands such as Back to Nature, Green Giants, McCann’s and Ortega, to name a few. Markedly, Green Giants has emerged as the company’s largest brand. During the second quarter, net sales from Green Giant products (including Le Sueur) increased a solid 45.4%. The company remains committed to product innovation and other brand enhancement investments in the second half of 2020, with special focus on the Green Giant brand.

Pricing Initiatives

The company’s strategic pricing initiatives have played an important role in strengthening revenues and profitability for a while now. During the second quarter, the company’s base business sales benefited from a rise in net pricing to the tune of $15.3 million. Management expects efficient pricing and the ongoing cost-saving efforts to help B&G Foods counter input cost inflation in 2020. Apart from this, B&G Foods is benefiting from higher online sales.

Online — a Great Avenue

During the second quarter, the company saw a number of online customers, thanks to the social-distancing trend. E-commerce sales form about 3-5% of the company’s sales and are accelerating with pace, mainly attributable to efficient delivery services of its retail customers like Amazon AMZN. The company expects solid e-commerce trends to continue and is also making investments to enhance its e-commerce capacity. The company expects to be fully e-commerce capable by fourth-quarter beginning.

All said, B&G Foods appears to be in a good shape to keep its splendid show on.

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