Bridgford Foods (BRID) has seen its share price lose nearly half its value this past year, mostly on concerns of commodity hikes, as big purchases of flour, meat products and fuel (the company has nearly 300 vehicles in its direct store delivery system) dominate its purchasing operations.
During its most recent quarter, sales were flat at $28.8 million, while its gross profit margin contracted 760 basis points to 34%. To add insult to injury, its SG&A costs bloated 420 basis points to 35.50%; however, the snack food purveyor was still able to eke out earnings of 13 cents compared to 15 cents.
The company’s stock is very sensitive to any buying or selling activity, since there are only 1.76 million shares available for trading (the float). That’s because family members hold the other 7.56 million shares (81% of the shares outstanding). The company continues to purchase back shares in the open market (371,000 shares remain under a 2 million share commitment) and, in doing so, has continued to reduce its tradable float.
I had the pleasure to attend last March’s annual meeting and hobnob with the bigwigs .Besides plenty of monkey bread samples, a great lunch and a lot of free samples to take home, I was somewhat able to retain elements of management’s presentation, despite the sugar high I endured from the monkey bread. Highlights included:
- The company has entered into a distribution pact with Golden Flake Food (Snyder's-ance is its other distribution partner).
- Dollar General (DG) has become a customer.
- A 5% price increase has been passed on.
- Shelf stable ready-to-eat meals currently being sold to the military will also be marketed to sportsmen and as ingredients for emergency/survival kits.
- Commodity escalations continue to be a concern, rising nearly $4 million in 2010.
- A single-serve version of monkey bread was developed.
The company has been approached before about selling, but don’t expect a buyout to come to fruition for a very long time, as nearly 30 family members are now employed. With fourth generation Bridgfords beginning to hit their stride, it appears the company is destined to see fifth generation Bridgfords begin to take their own place in history.
BRID’s balance sheet is pristine. It contains no debt and has nearly $12 million in cash, and its stock is selling at a mere 34% premium to shareholders equity of $6.49. The company owns the land and buildings at all five of its processing plants, in Anaheim; Statesville, NC; Dallas; and Chicago, and those properties are all on the books at cost, rather than current market price, presenting some nice hidden value that someday could be unlocked.
Two years ago, the company resumed paying a cash dividend. The current 10 cent payout represents about 1% yield. In BRID’s heyday, the dividend reached a peak of 28 cents, while its stock hit the $30 mark. The company is slated to report its second quarter results in two weeks, and should deliver eps of 10 cents (a 50% drop) on sales of $27 million (flat), thanks to stubbornly high input costs. Once input costs begin to ease and normalized conditions return, BRID will again flourish, making this little-known bargain equity a great place to park money -- especially for most risk-averse investors looking for something delicious to sink their teeth into.
Disclosure: I am long BRID.