Consumer Staples
Scott Mushkin thinks it is glaringly obvious that the company does not have enough labour in its stores, is putting off basic maintenance and has not invested enough in its asset base. While eliminating a competitor through a merger that should yield significant synergies would normally lead him to be more positive, Scott’s research around the poor store conditions and Walmart’s execution improvements being accompanied by an accelerating remodel programme, has led him to become very bearish and he sees significant equity downside despite the modest PE and EV/EBITDA multiples afforded to the stock.
Edition: 178
- 26 January, 2024
Consumer Staples
The volume declines and market share losses from a large, financially sound, supermarket chain are unprecedented in the 20+ years Scott Mushkin has been researching the industry - while he finds no “smoking gun” around exactly why the market share losses are so severe, reduced promotions (industry-wide) and some store slippage will have had an impact. Given the current business challenges, it throws into question the amount of net synergies KR will realise following its merger with Albertsons. Furthermore, vendors generally shift support away from companies that show sustained market share declines. The situation is unsustainable. TP $36 (25% downside).
Edition: 156
- 17 March, 2023