Helping Hostess earn a spot on JPMorgan’s Analysts Focus List, the industrial baker — and maker of Twinkies — is reportedly experiencing a rebound of sales at Walmart. JPMorgan increased its price target to $16 by $2, which already had an overweight rating on the company’s shares, CNBC reported.
JPMorgan analysts Ken Goldman and James Allen wrote in a research note, according to the report, “In our follow-up call with the company, management seemed to indicate that its recovery with a large customer (Walmart, surely) was merely on track. This may be conservative.”
According to the report, the baker’s sales to the retailer reached a record high in Q1. At the same time, JPMorgan indicates that its shipments beyond its segment of convenience, food and drug stores “accelerated greatly” over the first few weeks of Q2. In addition, the bank believes that the company’s Cloverhill bakery will turn to a tailwind from a headwind and says that metrics like gross profit margin and sales are propelling earnings.
Food accounts for a large chunk of American consumer spending: in 2017, that reached an annual 12.6 percent of what consumers spend every year or approximately $7,203 per the U.S. Census Bureau. Moreover, over half of that — $4,049 — was spent on food bought at grocery stores to consume at home. Despite that fact, 55 percent of consumers studied by PYMNTS said they use online as well as offline channels to purchase groceries.
At the same time, only 41 percent of shoppers said they only shop for groceries by taking a trip to a physical grocery store. Approximately 3 percent of these consumers, in one case, said they buy their groceries online and pick them up at the store.
Walmart, for its part, is doubling down on grocery pickup: According to reports last year, the company announced last September that it was offering grocery delivery in 50 metro areas across the United States.