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B&G Foods (BGS) Falls More Than 15% in 3 Months: Here's Why

B&G Foods, Inc. BGS is facing difficulties due to sluggish sales in both its foodservice and industrial divisions. Additionally, it is grappling with the adverse impacts of consistently high selling, general, and administrative (SG&A) expenses, which are squeezing its profitability.

These factors impacted BGS’ first-quarter 2024 results, wherein the top and bottom lines missed the Zacks Consensus Estimate and declined year over year.  Management is cautious about fiscal 2024, forecasting declines in net sales and adjusted earnings.

Shares of this Zacks Rank #5 (Strong Sell) company fell 16.2% in the past three months compared with the industry’s 6% decline. The stock has underperformed the Zacks Consumer Staple sector’s decline of 0.8%.

Let’s discuss this in detail.

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

Subdued Performance

The food industry has been facing widespread challenges, and B&G Foods is no exception. The company saw sluggish sales in recent quarters and the trend continued into the fiscal first quarter. The decline can be attributed to challenges in the foodservice sector and increased spending on promotions. Softness in both foodservice and industrial segments reflects a broader slowdown in out-of-home activity and volume.

Quarterly net sales decreased 7.1% to $475.2 million, primarily driven by lower unit volumes and the impact of pricing and product mix. Base business net sales also declined 4.4% to $475.3 million, mainly due to lower pricing, unfavorable product mix and decreased unit volumes in the fiscal first quarter.

High Costs

B&G Foods has been grappling with higher SG&A expenses for a while now. In first-quarter fiscal 2023, the company’s SG&A expenses escalated 4% to $48.6 million due to higher general and administrative expenses, consumer marketing costs, acquisition/divestiture-related costs and non-recurring expenses. As a percentage of net sales, SG&A expenses moved up 1.1 percentage points to 10.2% on a rise in general and administrative costs, mainly caused by modest inflation in wages, insurance and other professional services. The persistence of these elevated costs poses a threat to the company's performance.

Lowered View

Although B&G Foods has been encountering emerging challenges in foodservice and a slower rebound in net sales to retail customers, it hopes for a better performance in the latter half of the year. Considering these challenges, management recently lowered its fiscal 2024 view.

For fiscal 2024, the company anticipates net sales to be in the band of $1.955-$1.985 billion, down from $2.06 billion reported last year. Earlier, BGS expected the metric to be in the range of $1.975-$2.02 billion. Adjusted earnings per share (EPS) are envisioned to be between 75 cents and 95 cents, reflecting a year-over-year decline. The company had earlier expected EPS between 80 cents and $1.00.

Bottom Line

The company's endeavors to tackle these underlying issues seem daunting and underscore the significance of strategic decision-making and flexibility in a continuously changing market environment.

Solid Staple Bets

Vital Farms Inc. VITL offers a range of produced pasture-raised foods. It currently sports a Zacks Rank #1 (Strong Buy). VITL has a trailing four-quarter average earnings surprise of 102.1%. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Vital Farms’ current financial-year sales and earnings indicates growth of 22.5% and 59.3%, respectively, from the year-ago reported numbers.

Utz Brands Inc. UTZ, which manufactures a diverse range of salty snacks, currently carries a Zacks Rank #2 (Buy). UTZ has a trailing four-quarter earnings surprise of 2%, on average.

The consensus estimate for Utz Brands’ current financial-year earnings indicates growth of 26.3% from the year-ago reported numbers.

Conagra Brands CAG, a consumer-packaged goods food company, currently carries a Zacks Rank of 2. The Zacks Consensus Estimate for CAG’s current fiscal-year earnings indicates a decline of 5.1% from the year-ago reported figure.

Conagra Brands has a trailing four-quarter earnings surprise of 6.8%, on average.

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