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Levi Strauss, OrganiGram Holdings, United Natural Foods, Sprouts Farmers Market and Performance Food Group highlighted as Zacks Bull and Bear of the Day

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·10 min read
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For Immediate Release

Chicago, IL – April 21, 2021 – Zacks Equity Research Shares ofLevi Strauss & Co. LEVI as the Bull of the Day, OrganiGram Holdings Inc. OGI as the Bear of the Day. In addition, Zacks Equity Research provides analysis on United Natural Foods, Inc. UNFI, Sprouts Farmers Market, Inc. SFM and Performance Food Group Company PFGC.

Here is a synopsis of all five stocks:

Bull of the Day:

Founded in 1873 in San Francisco, Levi Strauss is a retail company known around the world for its iconic Levi's denim brand; Dockers, Denizen, and Signature by Levi Strauss & Co. are also under the company's umbrella. LEVI first went public back in 1971, but had been a private company up until its market return last year.

Q1 Earnings Recap

Despite 15% of its global store base remaining closed due to Covid-19, Levi's still beat analyst and its own management targets.

Sales fell 13%, which was less than expected, and the company saw improved profitability thanks to successful pricing and promotions trends. Additionally, operation income only declined 1% year-over-year as Levi's cut its selling expenses.

Most notably, however, was the retailer's record gross profit margin of 58%, which was boosted by rising prices and the shift toward higher-priced denim.

Its e-commerce segment outperformed as well, growing to 26% of total revenue compared to 16% in the year-ago quarter.

LEVI Breaks Out

Shares have surged recently on hopes of a rebound on the horizon, up about 80% over the past six months. Estimates have been rising too, and LEVI is a Zacks Rank #1 (Strong Buy) right now.

For the current fiscal year, four analysts have revised their bottom-line estimate upwards in the last 60 days, and the Zacks Consensus Estimate has moved up $0.14 to $1.11 per share. Earnings are expected to grow 428% compared to the prior year period, and 2022 should generate more profits as well.

Looking ahead, management expects sales growth between 24% and 25% for the first half of 2021 despite cautioning that the pandemic will continue to pressure its top line. The company also boosted its dividend to $0.06 per share, or a $24 million payout; shares currently yield 0.55% on an annual basis.

Additionally, Levi's launched an online secondhand store last year, reselling some of their classic vintage styles. This could be big for the company, especially as consumers are prioritizing environmental sustainability more and more.

If you're an investor searching for a retail stock to add to your portfolio, make sure to keep LEVI on your shortlist.

Bear of the Day:

OrganiGram Holdings is a Canadian-based medical cannabis company that sells to both individuals and physicians. The company also operates healing centers that focus on treating post-traumatic stress disorder and chronic pain, as well as providing trauma therapy.

Q2 Earnings Recap

OGI faced a ton of challenges in its second quarter, primarily weak industry dynamics, Covid-19, and resulting staffing limitations at its grow facility in New Brunswick. Several employees tested positive, resulting in many missed sales opportunities.

All three factors weighed on OrganiGram's performance.

Revenue of CA$19.2 million fell 29% year-over-year, while net revenue after excise taxes dropped 37% to CA$14.6 million.

Net loss for the period ballooned to CA$66.4 million compared to a much smaller net loss of CA$6.8 million in the prior-year period. Gross margin fell into negative territory because of a higher cost of sales, causing its adjusted EBITDA to fall.

Shares initially dropped 12% after the earnings report was released last week.

Bottom Line

OGI is now a Zacks Rank #5 (Strong Sell).

Four analysts have cut their full year earnings outlook over the past 60 days, and the consensus estimate has fallen six cents to a loss of $0.24 per share; earnings are expected to see a triple-digit decline for fiscal 2020.

Over the past one year, shares have gained about 48%, which is slightly ahead of the S&P 500's rally of 44%.

Going forward, CEO Greg Engel said OGI is "currently tracking to generate higher revenue in Q3 2021 as our new product portfolio continues to gain traction and we become better staffed to fulfill demand."

Additionally, the company recently acquired The Edibles & Infusions Corporation, which should help lift its cannabis edibles revenue.

While management believes last quarter's drop in business is temporary—and mostly related to the pandemic—investors should still be wary of any lingering uncertainties and industry impacts from Covid-19.

Investors who are interested in adding a company with cannabis exposure to their portfolio could consider pharma giant Johnson & Johnson. J&J stands to profit from the development of THC, CBD, and other marijuana-derived therapeutics; it's a #3 (Hold) on the Zacks Rank, and earnings are expected to grow about 18% in fiscal 2021.

Additional content:

E-Commerce Continues to Boost Grocery Sales

E-commerce has played a major role in helping the retail sector recover from a total collapse during the pandemic. While shops remained closed during the peak months of the pandemic, more people shopped online. This in a way changed the shopping habits of many who now prefer shopping online.

This has seen online grocery sales surging during the pandemic. Given that there are no signs of the coronavirus subsiding, e-commerce is likely to play a major role in the coming days.

Online Grocery Sales Grow

According to Brick Meets Click/Mercatus Grocery Shopping Survey, online grocery sales surged 43% in March on a year-over-year basis. Online grocery sales in March totaled $9.3 billion compared to $6.5 billion a year ago, as the second round of stimulus checks reached millions.

Moreover, the survey shows more than 69 million households placed 2.8 orders on average in March. Over 69.3 million households placed at least one or more online orders during March 2021 compared with 74.5 million a year ago, when stay-at-home orders were imposed and shops and businesses had to be temporarily shut down.

This is a slight loss in the number of people shopping online from last year's figures but that was primarily because many households are also making grocery purchases that are shipped to the home through common or contract carriers.

In fact, the curbside pickup segment gained 12%, and the delivery segment gained 23% in March, which proves that people are more comfortable shopping online.

Coronavirus Driving Online Sales

Although online grocery sales somewhat declined in February, it has once again bounced back as people spent more freely after the second round of stimulus checks started reaching them. In fact, that has helped the entire industry, with retail sales surging 9.8% month over month in March to hit a 10-month high.

Moreover, despite three vaccines being rolled out, the COVID-19 crisis is far from over, with new cases hardly subsiding. Also, many who are hesitant to shop at a physical store but at the same time don't want to pay for certain online grocery items have been going for curbside pickup, which is driving online sales further. Hence, online shopping will remain the preferred choice for most despite the COVID-19 vaccine being already rolled out.

Our Choices

Fears of the virus continue to exist irrespective of the vaccination drive. Preventive measures to keep the virus at bay are likely to see people ordering for all household necessities, including grocery, online. Given this situation, it would be prudent to watch out for these five stocks that are likely to rally on a sharp rise in demand for online grocery in the near future.

United Natural Foods is the leading distributor of natural, organic and specialty food and non-food products in the United States and Canada. The company carries more than 1,10,000 high-quality natural, organic and specialty products, consisting of national, regional and private label brands in six product categories.

The company's expected earnings growth rate for the current year is 29%. The Zacks Consensus Estimate for current-year earnings has improved 8.7% over the past 60 days. The company carries a Zacks Rank #2 (Buy). You can see the complete list of today's Zacks #1 Rank (Strong Buy) stocks here.

Sprouts Farmers Market which operates in a highly fragmented grocery store industry, has a unique model that features fresh produce, a foods section, and a vitamin department focused on overall wellness.

The company's expected earnings growth rate for next year is 10.2%. The Zacks Consensus Estimate for current-year earnings has improved 5.1% over the past 60 days. Sprouts Farmers Market has a Zacks Rank #2.

Performance Food Group markets and distributes food and food-related products. Its operating segment consists of Foodservice, Vistar, and PFG Customized.

The company's expected earnings growth rate for the current year is 85.7%. The Zacks Consensus Estimate for current-year earnings has improved 1.6% over the past 60 days. Performance Food Group carries a Zacks Rank #2.

+1,500% Growth: One of 2021's Most Exciting Investment Opportunities

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United Natural Foods, Inc. (UNFI) : Free Stock Analysis Report
 
Sprouts Farmers Market, Inc. (SFM) : Free Stock Analysis Report
 
Performance Food Group Company (PFGC) : Free Stock Analysis Report
 
Organigram Holdings Inc. (OGI) : Free Stock Analysis Report
 
Levi Strauss & Co. (LEVI) : Free Stock Analysis Report
 
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