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Top Opportunities in Rapidly Growing Pet Products Market (FRPT, CSOC, BARK, CHWY, WOOF, KR, WMT, TSCO)

The pet food industry is poised for strong, sustained growth for several key reasons. The most important driver is the fact that pet ownership rates […]
The…

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6 months ago

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The pet food industry is poised for strong, sustained growth for several key reasons. The most important driver is the fact that pet ownership rates are on the rise globally. This trend is riding tailwinds from demographic shifts such as increasing urbanization and a growing middle class in emerging markets. As families in developing economies gain more disposable income, they are more inclined to adopt pets and spend on quality pet food.

There is also a notable trend towards premiumization and humanization of pet food. Modern pet owners are increasingly concerned about the well-being of their animals and are willing to spend more on high-quality, organic, and specialty foods. This not only drives up average selling prices but also opens up avenues for high-margin products that could significantly boost profitability for companies in this space.

The pet products space also has strong barriers to entry due to rigorous regulations and quality control standards. That means that future growth is likely to go to current players in the market.

With that in mind, we take a closer look below at some of the more interesting stories in the space that investors should have on the radar.

 

Freshpet Inc (NASDAQ:FRPT) engages in manufacturing, marketing, and distribution of pet food and pet treats for dogs and cats. Its products are blends of fresh meats, vegetables and fruits farmed locally and made at Freshpet kitchens.

Its products include Deli Fresh Grain Free Chicken Recipe for Dogs, Joy Turkey and Apple Bites Treats, Nature’s Fresh Grain Free Chicken Recipe for Cats, and Vital Grain Free Chicken and Ocean Whitefish Recipe for Cats.

Freshpet Inc (NASDAQ:FRPT) recently announced announced that it has entered into a cooperation agreement with JANA Partners, one of the Company’s largest shareholders. As part of the agreement, Freshpet has appointed Timothy McLevish and Joseph E. Scalzo to its Board of Directors effective immediately.

According to the release, Mr. McLevish brings over 20 years of operational and financial leadership experience across multiple industries, including in branded food and retail. Mr. McLevish served as Chief Financial Officer at five public companies including Carrier Corporation, Walgreens Boots Alliance, Inc., Kraft Foods Group, Inc., Ingersoll-Rand Corporation and Mead Corporation.

“We are pleased to reach a constructive agreement with JANA. The Freshpet business has tremendous momentum and this agreement will help position us to continue delivering the results our shareholders expect,” said Billy Cyr, CEO of Freshpet. “We also welcome Tim and Joe to our team and are confident they will be valued colleagues and members of our Board as we work to continue capitalizing on the significant opportunities ahead and creating value for shareholders.”

Even in light of this news, FRPT hasn’t really done much of anything over the past week, with shares logging no net movement over that period. Over the past month, shares of the stock have suffered from clear selling pressure, dropping by roughly -8%.

Freshpet Inc (NASDAQ:FRPT) managed to rope in revenues totaling $183.3M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of 25.6%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($358.5M against $77.4M).

 

Caduceus Software Systems Corp (OTC US:CSOC) is one of the most interesting stocks in this group right now. The company is the parent corporation of McLovin’s Pet, a foremost player in the premium pet food and supply sector. McLovin’s is an exciting growth story that could be ready to gain some mainstream recognition with its latest news.

Specifically, the company announced a huge expansion last week into new retail channels that actually took place earlier this year under the radar.

Caduceus Software Systems Corp (OTC US:CSOC) management noted in the release that pet parents can now find McLovin’s high-quality pet food products in store at Tractor Supply Co (NASDAQ:TSCO) and Pet Supermarket and online at Petco Health and Wellness Company Inc (NASDAQ:WOOF).

As noted in the release, the significance of these partnerships cannot be overstated. Tractor Supply operates over 1,900 stores nationwide and Pet Supermarket boasts over 200 locations across the U.S. These collaborations provide McLovin’s with an unprecedented opportunity to reach pet parents across the country.

The release also stated that McLovin’s more affordable product line, Fur Valley Pet, is now available online at Chewy Inc (NYSE:CHWY), Walmart Inc (NYSE:WMT), and Kroger Co (NYSE:KR) through its Vitacost online store.

“McLovin’s has seen exponential growth in recent years, and it is with great excitement that we announce our recent retail partnerships,” said David Ji, Chief Executive Officer of McLovin’s Pet. “These collaborations enable us to offer our top-tier pet food products to a wider audience, ensuring that more pets can enjoy the benefits of nutritious, delicious meals.”

Caduceus Software Systems Corp (OTC US:CSOC) management is telling us, in no uncertain terms, that these partnerships are aimed to power greater market penetration and a wider end-market footprint

“We are delighted to expand our product offerings through our Fur Valley Pet line on platforms like Chewy.com, Kroger’s online shop Vitacost and Walmart Marketplace,” added Ji. “Online shopping is a significant part of the consumer landscape, and we are committed to meeting the needs of our customers wherever they choose to shop.”

 

BARK, Inc. (NYSE:BARK) bills itself as a dog-centric company, engaged in making products, services, and content for dogs. Its omni-channel brand, BARK, serves dogs in the following categories: Fun, Food, Health, and Home. It operates through the Direct to Consumer and Commerce segments.

The Direct to Consumer segment is composed of subscription-based products delivered on a monthly basis. The Commerce segment refers to the sale of BARK products in retail stores and other e-tailers.

BARK, Inc. (NYSE:BARK) recently announced that its Board of Directors has authorized the repurchase of up to $7.5 million of its common shares, the maximum amount set forth under the terms related to the Company’s outstanding convertible notes. This decision reflects the Company’s strong financial position, continued expansion into promising categories like consumables, and positive outlook on its future cash position.

“We remain committed to delivering value to our shareholders and today’s announcement is a testament to our healthy balance sheet and confidence in our ability to execute on our key initiatives,” said Zahir Ibrahim, Chief Financial Officer. “While limited by the terms related to our convertible notes, which cap our share repurchase capacity to $7.5 million each calendar year, we have the opportunity to repurchase over 3% of our market capitalization at current share prices. Given our robust runway, we believe this is a strategic use of capital.”

The stock has suffered a bit of late, with shares of BARK taking a hit in recent action, down about -14% over the past week. Shares of the stock have powered higher over the past month, rallying roughly 2% in that time on strong overall action.

BARK, Inc. (NYSE:BARK) managed to rope in revenues totaling $120.6M in overall sales during the company’s most recently reported quarterly financial data — a figure that represents a rate of top line growth of -8.1%, as compared to year-ago data in comparable terms. In addition, the company has a strong balance sheet, with cash levels exceeding current liabilities ($169.1M against $80.6M).

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February Employment Situation

By Paul Gomme and Peter Rupert The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000…

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1 day ago

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March 9, 2024

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By Paul Gomme and Peter Rupert

The establishment data from the BLS showed a 275,000 increase in payroll employment for February, outpacing the 230,000 average over the previous 12 months. The payroll data for January and December were revised down by a total of 167,000. The private sector added 223,000 new jobs, the largest gain since May of last year.

Temporary help services employment continues a steep decline after a sharp post-pandemic rise.

Average hours of work increased from 34.2 to 34.3. The increase, along with the 223,000 private employment increase led to a hefty increase in total hours of 5.6% at an annualized rate, also the largest increase since May of last year.

The establishment report, once again, beat “expectations;” the WSJ survey of economists was 198,000. Other than the downward revisions, mentioned above, another bit of negative news was a smallish increase in wage growth, from $34.52 to $34.57.

The household survey shows that the labor force increased 150,000, a drop in employment of 184,000 and an increase in the number of unemployed persons of 334,000. The labor force participation rate held steady at 62.5, the employment to population ratio decreased from 60.2 to 60.1 and the unemployment rate increased from 3.66 to 3.86. Remember that the unemployment rate is the number of unemployed relative to the labor force (the number employed plus the number unemployed). Consequently, the unemployment rate can go up if the number of unemployed rises holding fixed the labor force, or if the labor force shrinks holding the number unemployed unchanged. An increase in the unemployment rate is not necessarily a bad thing: it may reflect a strong labor market drawing “marginally attached” individuals from outside the labor force. Indeed, there was a 96,000 decline in those workers.

Earlier in the week, the BLS announced JOLTS (Job Openings and Labor Turnover Survey) data for January. There isn’t much to report here as the job openings changed little at 8.9 million, the number of hires and total separations were little changed at 5.7 million and 5.3 million, respectively.

As has been the case for the last couple of years, the number of job openings remains higher than the number of unemployed persons.

Also earlier in the week the BLS announced that productivity increased 3.2% in the 4th quarter with output rising 3.5% and hours of work rising 0.3%.

The bottom line is that the labor market continues its surprisingly (to some) strong performance, once again proving stronger than many had expected. This strength makes it difficult to justify any interest rate cuts soon, particularly given the recent inflation spike.

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Mortgage rates fall as labor market normalizes

Jobless claims show an expanding economy. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

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2 days ago

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March 8, 2024

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Everyone was waiting to see if this week’s jobs report would send mortgage rates higher, which is what happened last month. Instead, the 10-year yield had a muted response after the headline number beat estimates, but we have negative job revisions from previous months. The Federal Reserve’s fear of wage growth spiraling out of control hasn’t materialized for over two years now and the unemployment rate ticked up to 3.9%. For now, we can say the labor market isn’t tight anymore, but it’s also not breaking.

The key labor data line in this expansion is the weekly jobless claims report. Jobless claims show an expanding economy that has not lost jobs yet. We will only be in a recession once jobless claims exceed 323,000 on a four-week moving average.

From the Fed: In the week ended March 2, initial claims for unemployment insurance benefits were flat, at 217,000. The four-week moving average declined slightly by 750, to 212,250


Below is an explanation of how we got here with the labor market, which all started during COVID-19.

1. I wrote the COVID-19 recovery model on April 7, 2020, and retired it on Dec. 9, 2020. By that time, the upfront recovery phase was done, and I needed to model out when we would get the jobs lost back.

2. Early in the labor market recovery, when we saw weaker job reports, I doubled and tripled down on my assertion that job openings would get to 10 million in this recovery. Job openings rose as high as to 12 million and are currently over 9 million. Even with the massive miss on a job report in May 2021, I didn’t waver.

Currently, the jobs openings, quit percentage and hires data are below pre-COVID-19 levels, which means the labor market isn’t as tight as it once was, and this is why the employment cost index has been slowing data to move along the quits percentage.  

2-US_Job_Quits_Rate-1-2

3. I wrote that we should get back all the jobs lost to COVID-19 by September of 2022. At the time this would be a speedy labor market recovery, and it happened on schedule, too

Total employment data

4. This is the key one for right now: If COVID-19 hadn’t happened, we would have between 157 million and 159 million jobs today, which would have been in line with the job growth rate in February 2020. Today, we are at 157,808,000. This is important because job growth should be cooling down now. We are more in line with where the labor market should be when averaging 140K-165K monthly. So for now, the fact that we aren’t trending between 140K-165K means we still have a bit more recovery kick left before we get down to those levels. 




From BLS: Total nonfarm payroll employment rose by 275,000 in February, and the unemployment rate increased to 3.9 percent, the U.S. Bureau of Labor Statistics reported today. Job gains occurred in health care, in government, in food services and drinking places, in social assistance, and in transportation and warehousing.

Here are the jobs that were created and lost in the previous month:

IMG_5092

In this jobs report, the unemployment rate for education levels looks like this:

  • Less than a high school diploma: 6.1%
  • High school graduate and no college: 4.2%
  • Some college or associate degree: 3.1%
  • Bachelor’s degree or higher: 2.2%
IMG_5093_320f22

Today’s report has continued the trend of the labor data beating my expectations, only because I am looking for the jobs data to slow down to a level of 140K-165K, which hasn’t happened yet. I wouldn’t categorize the labor market as being tight anymore because of the quits ratio and the hires data in the job openings report. This also shows itself in the employment cost index as well. These are key data lines for the Fed and the reason we are going to see three rate cuts this year.

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January…

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March 8, 2024

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Inside The Most Ridiculous Jobs Report In History: Record 1.2 Million Immigrant Jobs Added In One Month

Last month we though that the January jobs report was the "most ridiculous in recent history" but, boy, were we wrong because this morning the Biden department of goalseeked propaganda (aka BLS) published the February jobs report, and holy crap was that something else. Even Goebbels would blush. 

What happened? Let's take a closer look.

On the surface, it was (almost) another blockbuster jobs report, certainly one which nobody expected, or rather just one bank out of 76 expected. Starting at the top, the BLS reported that in February the US unexpectedly added 275K jobs, with just one research analyst (from Dai-Ichi Research) expecting a higher number.

Some context: after last month's record 4-sigma beat, today's print was "only" 3 sigma higher than estimates. Needless to say, two multiple sigma beats in a row used to only happen in the USSR... and now in the US, apparently.

Before we go any further, a quick note on what last month we said was "the most ridiculous jobs report in recent history": it appears the BLS read our comments and decided to stop beclowing itself. It did that by slashing last month's ridiculous print by over a third, and revising what was originally reported as a massive 353K beat to just 229K,  a 124K revision, which was the biggest one-month negative revision in two years!

Of course, that does not mean that this month's jobs print won't be revised lower: it will be, and not just that month but every other month until the November election because that's the only tool left in the Biden admin's box: pretend the economic and jobs are strong, then revise them sharply lower the next month, something we pointed out first last summer and which has not failed to disappoint once.

To be fair, not every aspect of the jobs report was stellar (after all, the BLS had to give it some vague credibility). Take the unemployment rate, after flatlining between 3.4% and 3.8% for two years - and thus denying expectations from Sahm's Rule that a recession may have already started - in February the unemployment rate unexpectedly jumped to 3.9%, the highest since February 2022 (with Black unemployment spiking by 0.3% to 5.6%, an indicator which the Biden admin will quickly slam as widespread economic racism or something).

And then there were average hourly earnings, which after surging 0.6% MoM in January (since revised to 0.5%) and spooking markets that wage growth is so hot, the Fed will have no choice but to delay cuts, in February the number tumbled to just 0.1%, the lowest in two years...

... for one simple reason: last month's average wage surge had nothing to do with actual wages, and everything to do with the BLS estimate of hours worked (which is the denominator in the average wage calculation) which last month tumbled to just 34.1 (we were led to believe) the lowest since the covid pandemic...

... but has since been revised higher while the February print rose even more, to 34.3, hence why the latest average wage data was once again a product not of wages going up, but of how long Americans worked in any weekly period, in this case higher from 34.1 to 34.3, an increase which has a major impact on the average calculation.

While the above data points were examples of some latent weakness in the latest report, perhaps meant to give it a sheen of veracity, it was everything else in the report that was a problem starting with the BLS's latest choice of seasonal adjustments (after last month's wholesale revision), which have gone from merely laughable to full clownshow, as the following comparison between the monthly change in BLS and ADP payrolls shows. The trend is clear: the Biden admin numbers are now clearly rising even as the impartial ADP (which directly logs employment numbers at the company level and is far more accurate), shows an accelerating slowdown.

But it's more than just the Biden admin hanging its "success" on seasonal adjustments: when one digs deeper inside the jobs report, all sorts of ugly things emerge... such as the growing unprecedented divergence between the Establishment (payrolls) survey and much more accurate Household (actual employment) survey. To wit, while in January the BLS claims 275K payrolls were added, the Household survey found that the number of actually employed workers dropped for the third straight month (and 4 in the past 5), this time by 184K (from 161.152K to 160.968K).

This means that while the Payrolls series hits new all time highs every month since December 2020 (when according to the BLS the US had its last month of payrolls losses), the level of Employment has not budged in the past year. Worse, as shown in the chart below, such a gaping divergence has opened between the two series in the past 4 years, that the number of Employed workers would need to soar by 9 million (!) to catch up to what Payrolls claims is the employment situation.

There's more: shifting from a quantitative to a qualitative assessment, reveals just how ugly the composition of "new jobs" has been. Consider this: the BLS reports that in February 2024, the US had 132.9 million full-time jobs and 27.9 million part-time jobs. Well, that's great... until you look back one year and find that in February 2023 the US had 133.2 million full-time jobs, or more than it does one year later! And yes, all the job growth since then has been in part-time jobs, which have increased by 921K since February 2023 (from 27.020 million to 27.941 million).

Here is a summary of the labor composition in the past year: all the new jobs have been part-time jobs!

But wait there's even more, because now that the primary season is over and we enter the heart of election season and political talking points will be thrown around left and right, especially in the context of the immigration crisis created intentionally by the Biden administration which is hoping to import millions of new Democratic voters (maybe the US can hold the presidential election in Honduras or Guatemala, after all it is their citizens that will be illegally casting the key votes in November), what we find is that in February, the number of native-born workers tumbled again, sliding by a massive 560K to just 129.807 million. Add to this the December data, and we get a near-record 2.4 million plunge in native-born workers in just the past 3 months (only the covid crash was worse)!

The offset? A record 1.2 million foreign-born (read immigrants, both legal and illegal but mostly illegal) workers added in February!

Said otherwise, not only has all job creation in the past 6 years has been exclusively for foreign-born workers...

Source: St Louis Fed FRED Native Born and Foreign Born

... but there has been zero job-creation for native born workers since June 2018!

This is a huge issue - especially at a time of an illegal alien flood at the southwest border...

... and is about to become a huge political scandal, because once the inevitable recession finally hits, there will be millions of furious unemployed Americans demanding a more accurate explanation for what happened - i.e., the illegal immigration floodgates that were opened by the Biden admin.

Which is also why Biden's handlers will do everything in their power to insure there is no official recession before November... and why after the election is over, all economic hell will finally break loose. Until then, however, expect the jobs numbers to get even more ridiculous.

Tyler Durden Fri, 03/08/2024 - 13:30

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