Cakes giant Premier Foods (LSE: PFD) sent investors scurrying for the exits during Wednesday trading with the release of a shocking trading statement. Shares in the food manufacturer were last dealing 14% lower on the day and at levels not seen since last June.
Premier Foods announced that, although sales ticked 4.5% higher during December, aggregate revenues for the third quarter slipped 1% from a year earlier, to £251.4m. And the business said that it expects conditions to “remain challenging during the fourth quarter,” adding that “sales will be below previous expectations.”
But sluggish sales are not Premier Foods’ only problem, and the Mr Kipling owner commented that “recovery of significant input cost inflation in certain areas is taking longer than originally foreseen” as the cost of items such as sugar, chocolate, dairy products and wheat have increased.
As a result Premier Food expects trading profits to be around 10% lower than previously expected in the 12 months to March 2017.
Supermarket in the soup?
By comparison, supermarket slugger Tesco (LSE: TSCO) has, for the large part, performed pretty solidly in recent months, continuing the steady sales recovery that kicked in early in 2016.
The Cheshunt business saw like-for-like sales in its core UK marketplace rise 1.8% during the 13 weeks to November 26, it announced last week. However, Tesco announced that the checkouts had begun to slow during the key Christmas period, with underlying sales rising by a less-impressive 0.7% in the six weeks to January 7.
Of course it is too early to proclaim that the festive figures are the start of another revenues reversal at Tesco. But given that the British supermarket space continues to fragment, with value chains Aldi and Lidl and premium outlets like M&S and Waitrose all expanding their bricks-and-mortar presence, I believe Tesco still faces a colossal challenge to keep the top line growing.
And with the business also facing the same cost pressures as Premier Foods, I reckon hopes of a solid profits recovery at Tesco could also fall flat.
Tasty titan
I have no such worries over the earnings outlook of comfort food favourite Just Eat (LSE: JE), however, and expect its expanding global imprint to deliver stunning returns.
The takeaway colossus saw its share price slip to two-and-a-half-month troughs last week after advising that sales have continued to cool. Like-for-like revenues rose 36% during 2016, the firm advised, lower than the rises of 50% and 46% punched in 2014 and 2015.
But Just Eat’s chunky sales figures are clearly not to be scoffed at. And the company continues to invest heavily across the globe to keep sales on an upward slant. Just last month the firm made acquisitions in Canada and the UK, and in the case of the latter the acquisition of hungryhouse for a possible £240m could prove a particular game changer.
And with sterling set to keep sliding in the months ahead, Just Eat is also on course to enjoy currency tailwinds in 2017 and potentially beyond.
