Consumer Staples

Report by Quo Vadis Capital

SFM has now exceeded analyst estimates for 15 consecutive quarters with the average EPS beat of $0.11 representing ~30% upside. The stock trades at less than half the multiples the market is granting investment-banking darling Grocery Outlet even though SFM boasts dramatically better margins, returns and FCF with an identical unit growth rate. John Zolidis estimates that the average store generates over $2.5m in cash p.a. As the store base grows, so will earnings and cash flow and he believes this will occur at rate well above what is currently discounted in the shares and bearish expectations. 17 analysts cover SFM, yet only 1 has a Buy rating vs. 6 Sell ratings. Short interest is 16%.

Consumer Staples

Report by Quo Vadis Capital

GO’s model implodes - could turn out to be John Zolidis’ best short call of the year. The Street is materially overpaying for the growth of this low-margin, low-ROIC business. There has never been a 50% closeout food retailer that has been able to scale. GO faces substantial risks as it expands into new markets and the increase in online food ordering has exposed the lack of flexibility in its model. The multiple for this stock is wrong (15x EV/EBITDA), it should trade at a similar multiple to peers (6x EBITDA).