CIBC PreviewCurrently have a $120.00 target, one of the lowest on the Street. GLTA
EQUITY RESEARCH
May 3, 2022 Flash Research
PREMIUM BRANDS HOLDINGS
CORPORATION
Q1/22 Preview: Inflation Test Continues
PBH will report Q1 results before market open on Friday, May 6, with a call
that afternoon at 1:30 p.m. ET. Dial-in is 833-300-9218 or 647-689-4551
(passcode: 3093083).
PBH (-16% YTD) has underperformed the staples index (+6%), which we
attribute to PBH’s exposure to food cost increases, delays in passing through
pricing, and potential for consumers trading down to lower-priced items.
Roughly 65% of PBH’s sales feature dynamic pricing (adjusted in 1-2
weeks), but these skew lower-margin. Specialty Foods’ (SF) GM%, which
generates 65% of GM$, declined over 170 bps Y/Y in both Q3 and Q4, while
CPI escalated to 8.5% on average in Q1, ~200 bps higher than in Q4.
We expect the 2022 EBITDA guide of $510MM-$530MM may be reduced
this quarter owing to persistent inflation, or M&A contributions could be
required to reach the goal. For Q1, we forecast 4% organic volume growth
(OVG) in SF, and 6% OVG in Premium Food Distribution (PFD). Pricing
(+11%) and M&A (+10%) are the largest drivers of our +24% sales forecast.
We expect key topics for the call will include consumer response to price
increases, an updated inflation forecast, and commentary on M&A potential
given current leverage (3.3x forward EBITDA) and limited cash flow expected
this year.