Cramer's recent interview with Hains Food (Hain) CEO Irwin Simon was one of his worst calls ever. I have to tell you that generally I am a fan of Cramer because he provides good insight into companies and usually doesn't play favorites. He also generally recommends "best of breed " companies with sound rationale and catalysts for improved stock performance.
Hain Foods is not "best of breed" in the the food manufacturing sector. If you're looking for best of breed in the food sector look to General Mills (GIS), Nestle (NSRGY.PK), Smuckers (SJM) or even Treehouse (THS) in the private label sector.
So what is wrong with Hain Foods ? First, they really only have one nationally, recognizable brand in Celestial Seasonings. In this current environment, tier one brands are doing well along with private label. Tier 3 and tier 4 brands are struggling. Second, they have no critical mass in any one category. Retailers continue to hold the leverage (i.e. shelf space) and the brands that are performing the best have #1 market share and are strong leaders in their categories. Third, consumers are still very price-conscious and that is holding back sales in the Natural and Organic area. While that may change if the economy continues to improve, we dont believe that will be a strong catalyst for sales growth for Hain Foods.
One need only look to Hains sales growth to find the answer. Last quarter sales were $242mm v.s. the previous year at $312mm. For the current quarter, sales are estimated to decline -14%. In the consumer foods sector, sales growth is key. It is certainly tough in this deflationary environment, but the better performers are at least delivering positive sales growth.
Lastly, there was no mention of Mr. Simon selling more than $400,000 in Hain stock on April 1, 2010. Not the sort of unbiased reporting that we expect from Cramer.
Hain does have a strong position in the healthy and better for you food sector. However, they have not figured out a way to leverage their portfolio of brands and the sector itself is still under pressure.
Hain Foods is not "best of breed" in the the food manufacturing sector. If you're looking for best of breed in the food sector look to General Mills (GIS), Nestle (NSRGY.PK), Smuckers (SJM) or even Treehouse (THS) in the private label sector.
So what is wrong with Hain Foods ? First, they really only have one nationally, recognizable brand in Celestial Seasonings. In this current environment, tier one brands are doing well along with private label. Tier 3 and tier 4 brands are struggling. Second, they have no critical mass in any one category. Retailers continue to hold the leverage (i.e. shelf space) and the brands that are performing the best have #1 market share and are strong leaders in their categories. Third, consumers are still very price-conscious and that is holding back sales in the Natural and Organic area. While that may change if the economy continues to improve, we dont believe that will be a strong catalyst for sales growth for Hain Foods.
One need only look to Hains sales growth to find the answer. Last quarter sales were $242mm v.s. the previous year at $312mm. For the current quarter, sales are estimated to decline -14%. In the consumer foods sector, sales growth is key. It is certainly tough in this deflationary environment, but the better performers are at least delivering positive sales growth.
Lastly, there was no mention of Mr. Simon selling more than $400,000 in Hain stock on April 1, 2010. Not the sort of unbiased reporting that we expect from Cramer.
Hain does have a strong position in the healthy and better for you food sector. However, they have not figured out a way to leverage their portfolio of brands and the sector itself is still under pressure.
No comments:
Post a Comment