Canaccord Genuity on Consumer/Retail (Health, Wellness & Lifestyle): Getting the Natural and Organic Message (WFM, UNFI, BNNY, STKL, SNAK, HAIN)

Canaccord Genuity on Consumer/Retail (Health, Wellness & Lifestyle): Getting the Natural and Organic Message

Scott Van Winkle comments on five companies that presented at the Canaccord Global Growth Conference including: Whole Foods (Nasdaq: WFM), United Natural Foods (Nasdaq: UNFI), Annie's (Nasdaq: BNNY), SunOpta (Nasdaq: STKL) and Inventure (Nasdaq: SNAK)

Van Winkle said, "The consistency across the presentations and results lay in the sector’s growth and broadening consumer adoption. Favorable industry growth was noted across the board while margins are expanding as well. We anticipate the strong growth to continue; challenges such as commodity inflation are not expected to impact consumer demand or the earnings outlook."

"Given this summer’s drought in many parts of the Midwest, commodity inputs were a topic in many of the Q&A sessions. The general consensus among the companies discussing commodities is that the current commentary and concerns over commodity risks are overdone. While several inputs will be pressured with lower yields and higher prices given this coming year, inflation is currently moderating from recent peak levels and many input prices are lower. Most participants expect inflation to moderate for another couple of quarters before picking back up, but inflation over the coming year is not anticipated to reach the peak levels experienced earlier this year."

For Buy-rated WFM: largely focused on its opportunity for unit growth and highlighted its strong margin performance. The company reiterated its 1,000 store opportunity in the US and is very bullish on its opportunity in Canada.

Buy-rated UNFI: focused its presentation on its distribution system improvements and plans to enhance its distribution infrastructure. The company’s goal, after its upcoming warehouse management system upgrade in the Pacific Northwest, is to ultimately convert three to four distribution centers per year.

Hold-rated BNNY: discussion centered around distribution gains, the frozen pizza launch and its general growth opportunity...The company didn’t reveal its two new snack line launches, which caused higher SG&A during Q1, but noted they will begin selling in January.

Buy-rated STKL: conference presentation that reflected the company’s efforts over the last couple of years to divest non-core businesses, simplify its structure and improve margins. The company provided streamlined view of its integrated platform and presented its medium-term goals for business mix and profitability.

Buy-rated SNAK: presentation on its core brands and its continued transition toward natural and healthy snacks. The company recently reported in-line Q2 results, but management noted its disappointment in the growth generated during Q2...Within its fruit segment, Jamba (Nasdaq: JMBA) smoothies are now available in 17,000 doors, up from 9,000 during its presentation at the conference a year ago, and the Rader Farms segment continues to post robust growth

Separately, for Buy-rated Hain Celestial (Nasdaq: HAIN), the company will report Q4 (ended June) results after the close on August 22.

"We expect HAIN to perpetuate the trend of sales and earnings momentum in the sector. We anticipate that Q4 results will demonstrate an acceleration in US consumption at retail. With the UK operations delivering strong profit driven by last year’s Daniels acquisition, strong US fundamentals across the natural and organic sector and margin strength, we anticipate potential for some upside to expectations."

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