Strong Distribution Gains Underpin Real Good Food's FY23 Sales, Earnings Outlook: Analyst

  • William Blair analyst Jon Anderson reiterated Outperform rating on the shares of Real Good Food Company Inc RGF.
  • The company’s Q1 earnings quality was solid, with sales and gross margin above and the operating expense ratio higher than the analyst’s forecast.
  • Underpinned by strong distribution gains, the management’s reiteration on FY23 sales and earnings guidance is encouraging, said the analyst.
  • The 21% organic sales decline, the analyst noted, was primarily due to the timing of select promotional events that benefited last year’s sales.
  • The analyst said that a significantly improved gross margin rate in the quarter lends credence to the company’s profitability targets once manufacturing facilities are fully utilized.
  • The analyst believes Real Good can disrupt frozen food categories with on-trend high protein, low carbohydrate items, including entrées and breakfast sandwiches, aided by its food systems and manufacturing capabilities.
  • However, risks to the narrative includes, competition with limited time in market for the brand; execution complexity while building operating and production capabilities; and cost inflation and supply chain disruption.
  • Price Action: RGF shares are trading lower by 4.43% at $3.77 on the last check Monday.
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