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B&G Foods (BGS) Poised on E-commerce Growth, Prudent Buyouts

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  • BGS

Focus on strategic acquisitions and growing e-commerce business is working well for B&G Foods, Inc. BGS. The company is also benefiting from pandemic-induced elevated at-home consumption. However, high costs associated with COVID-19 as well as input cost inflation are headwinds.

Let’s discuss further.

What is Favoring B&G Foods?

B&G Foods is benefiting from higher online sales, especially amid the pandemic-induced social-distancing trends. During first-quarter fiscal 2021, retail sales of the company’s brands through e-commerce platforms surged more than 60% to reach $50 million. In its last earnings call, management highlighted that it expects e-commerce retail sales for fiscal 2021 to keep growing at this rate and come in at $275 million. E-commerce sales are accelerating with pace, mainly attributable to efficient delivery services of the company’s retail customers. The company expects to continue seeing solid online trends in 2021 and is making investments to strengthen its online presence and market with several retailers on their websites.

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Zacks Investment Research

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B&G Foods is actively pursuing strategic acquisitions to boost growth. The company acquired Crisco brand from The J. M. Smucker Company SJM in December 2020. B&G Foods’ net sales in fiscal first quarter reflect gains worth $58.1 million from the Crisco acquisition. In 2021, Crisco is expected to make favorable contributions to B&G Foods’ top line. Prior to this, the company had acquired Farmwise (in February 2020). Further, B&G Foods acquired and integrated retail baking powder maker, Clabber Girl (in May 2019). Management is committed toward product innovation and other brand-enhancement investments.

Retail Channel Gains on Higher Demand

B&G Foods’ retail business is seeing continued momentum since last summer as more Americans are embracing cooking and seasoning meals at home amid the pandemic. This was reflected in fiscal first-quarter results, with earnings and sales increasing on a year-over-year basis. Management expects to keep witnessing solid consumer demand for its products for the rest of fiscal 2021. B&G Foods’ foodservice business is also showing signs of rebound as away-from-home channel are improving.

What’s Hurting B&G Foods?

During first-quarter fiscal 2021, B&G Foods incurred nearly $2.9 million in additional pandemic-led costs at its production facilities including temporary-enhanced compensation for manufacturing employees, compensation to manufacturing employees in quarantine as well as costs associated with taking precautionary health and safety measures. The company’s SG&A expenses have been rising year over year for quite some time. In the quarter, B&G Foods’ SG&A expenses increased 26% thanks to rise in consumer marketing costs, acquisition/divestiture-induced and non-recurring expenses, warehousing costs as well as general and administrative expenses.

B&G Foods is battling cost inflation for a while. During the first quarter, it saw low to mid single-digit inflation on a blended basis in basket of goods with notable spike in agricultural products and commodity-associated input costs. Inflation in corrugated steel and aluminum also led to the downside. Management expects to keep seeing input cost inflation for ingredients, packaging and transportation in fiscal 2021. That being said, the company is focused on undertaking cost-cutting efforts coupled with revenue-enhancing actions across many brands. Such cost-saving efforts along with the aforementioned upsides are likely to help this Zacks Rank #3 (Hold) company stay afloat amid such hurdles.

B&G Foods’ stock has gained 16.8% in the past year compared with the industry’s growth of 15.3%.

Key Food Picks

Darling Ingredients Inc. DAR, currently sporting a Zacks Rank #1 (Strong Buy), has a trailing four-quarter earnings surprise of 29.8%, on average. You can see the complete list of today’s Zacks #1 Rank stocks here.

Medifast, Inc. MED, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of 12.7%, on average.

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