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B&G Foods (BGS) to Sell Portland Property to Enhance Productivity

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B&G Foods, Inc. BGS has been focused on efforts to enhance productivity and lower overall costs. Along these lines, the company announced plans to offload its Portland, Maine manufacturing facility along with a 13.5-acre waterfront property to the Institute for Digital Engineering and Life Sciences. Meanwhile, management will shift production of B&M, Underwood and certain other brands to the company’s existing manufacturing facilities as well as third-party co-manufacturing units.

The company does not expect to face any disruption in production or delivery of customer orders associated with the transition of production operations. Management envisions the transition to conclude by fourth-quarter 2021 or the first quarter of 2022. Meanwhile, the aforementioned sale of property is expected to be complete by the end of 2021.

B&G Foods is committed toward helping its employees through the transition phase with financial help and assistance in looking for new jobs. The company expects to incur cash and non-cash charges associated with employee severance and other employee costs, multi-employer pension plan withdrawal liability as well as the write off of equipment and other assets among other costs, during the third and the fourth of fiscal 2021. That being said, cost savings from the manufacturing operations transition is likely to more than offset annual cash payments for the multi-employer pension plan withdrawal liability. The rest of the cash portion of one-time charges is likely to be offset by the proceeds from the Portland property sales.

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What’s Working for B&G Foods?

B&G Foods is witnessing more consumers cooking, baking and eating at home compared with pre-pandemic levels. It is also benefiting from foodservice recovery as restaurants and eating establishments are reopening. Net sales performance during second-quarter fiscal 2021 was better than 2019 levels (pre-pandemic period). On a two-year compound annual growth basis, compared with pre-pandemic levels, net sales improved 11.8%

B&G Foods has a successful track record of acquisition-led growth. The company has integrated more than 50 brands into the portfolio since its establishment in 1996. The company is actively pursuing strategic acquisitions to boost growth. B&G Foods acquired the Crisco brand from The J. M. Smucker Company SJM in December 2020, which contributed to the company’s performance in fiscal second quarter. In fiscal 2021, Crisco is expected to make favorable contributions to B&G Foods’ top line.

Wrapping Up

The Zacks Rank #5 (Strong Sell) company is grappling with pandemic-induced costs for a while now. During fiscal second quarter, the company incurred COVID-19 expenses of $1.2 million. Management, in its last earnings call, highlighted that it expects to keep seeing significant cost inflation for ingredients, packaging and transportation. Although the company is undertaking various revenue-enhancing and cost-control measures, it is yet to be seen if the same can mitigate such cost-related headwinds.

B&G Foods’ stock has declined 4.2% in the past six months against the industry’s growth of 1.9%.

Top 2 Picks

Pilgrim’s Pride Corporation PPC, currently carrying a Zacks Rank #2 (Buy), has a trailing four-quarter earnings surprise of almost 34%, on average. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Hormel Foods Corporation HRL, currently carrying a Zacks Rank #2, has a long-term earnings growth rate of 7.4%.


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