Six Simply Good Foods insiders bought $1.1M of SMPL. The fast growing health food company is down 42% YTD.

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Six Simply Good Foods insiders bought $1.1M of SMPL stock on April 9-13 at prices ranging from $16.32 to $16.86. The directors’ buying comes after the consumer goods company has fallen 42% YTD. Simply Good Foods makes branded nutrition bars and ready-to-drink shakes for people following the Atkins diet and other diet plans.

On April 6, Simply Good posted Q2 revenue of $227.1M vs. $221M consensus and adjusted EBITDA $41.7M vs. $34M consensus. However, SMPL also pulled guidance for the rest of 2020. The reason? Questions surrounding the COVID-19 pandemic’s impact on sales. The company warned that the severity and duration of the COVID-19 pandemic is uncertain and will likely continue during the second half of the company’s fiscal year.

After the Q2 report, SMPL opened 4% higher at $19.51, but sellers took over, and the stock closed at $15.77 on April 9 and was recently trading at $17.64.

Simply Good Foods (SMPL) year-to-date daily chart. Source: Interactive Brokers

The Simply Good Foods insiders are viewing the weakness as an opportunity. Over April 9-13, six directors filed Form 4’s disclosing a total of 68,000 shares at an average price of $16.31. All the insiders have extensive histories as executives in the packaged foods industry.

Six Simply Good Foods insiders bought on April 9-13.

Filing DateInsiderTitleTransactionTrade Date Shares Avg. Price Total % Change
09-Apr-2020Daley Clayton C JrDirectorOpen Mkt Buy09-Apr-2020        10,000 16.77 $        167,668 16.67%
09-Apr-2020Ghez NomiDirectorOpen Mkt Buy09-Apr-2020        30,000 16.32 $        489,460 27.19%
09-Apr-2020Healey James EDirectorOpen Mkt Buy09-Apr-2020          5,000 16.86 $          84,300 9.96%
13-Apr-2020Montgomery Robert G.DirectorPrivate Purchase13-Apr-2020          3,000 15.97 $          47,916 6.59%
13-Apr-2020Ratzan Brian K.DirectorPrivate Purchase13-Apr-2020        15,000 16 $        240,000 22.64%
13-Apr-2020Daley Clayton C JrDirectorPrivate Purchase13-Apr-2020          5,000 15.97 $          79,850 7.14%

The recent insider buying follows a $2.8M cluster of purchases by insiders in Jan. and Feb. of this year at prices around $23.

The SMPL post-Q2 report selling was likely focused on SMPL’s pulling of guidance. Here’s what CEO Joe Scalzo had to say about the COVID-19 impacts on his company’s sales.

“…March was really volatile. Through the early portion of March up to the weekend of the 20, 21, we saw a significant spike in foot traffic and a significant uptick in our business, in both our business as well as the category. The weekend of the 20th and 21st appeared to be an inflection point in people’s shopping behaviors, a dramatic fall-off, double digit fall-off that has remained through the end of the month in people’s shopping patterns and going into stores. We saw significant channel shifting, so e-commerce, online, pick-up and delivery all accelerated, and then brick and mortar saw a significant fall-off that’s kind of remained until now.”

Simply Good CEO on Covid impact: “E-commerce, online, pick-up and delivery all accelerated…brick and mortar saw a significant fall-off.”

In the Q&A, an analyst mentioned anecdotal information that business had picked up in early April. Scalzo replied: “Yes, the last few days have been much better than the previous two weeks.”

Scalzo went on to say:

As I mentioned earlier, we’re fortunate to participate in a category that has so many positive underlying growth characteristics. We believe that health and wellness will continue to be an important part of consumers’ lives, that the megatrends related to healthy snacking, convenience, meal replacement and on-the-go eating are long term trends, and that the low household penetration of this category will be a tailwind for our business for years to come. As such, we believe and have confidence in the long term growth prospects of our brands and our business.

On March 6, prior to the Q2 report and SMPL’s withdrawal of 2020 guidance, DA Davidson analyst Brian Holland lowered the firm’s price target on SMPL to $28 from $33. He kept a buy rating on the shares. The analyst said that heightened competition within shakes was likely the primary catalyst behind the deceleration of the company’s Atkins label. Holland noted however that the stock price decline had already priced in a potential miss in the company’s FY20 guidance, adding that the label needs to grow just 1%-2% in the second half of 2020 to reach the management’s targets.

You can follow insider buying at the SEC’s Edgar website or at sites like WhaleWisdom.com.

Contact Mark about investing based on SEC filings and smart money disclosures.

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