Plant-based food producer Tattooed Chef's (NASDAQ: TTCF) stock has been underperforming the markets as shares are down (-15%) for 2021. The natural, clean, and sustainable plant-based food revolution is still strong, and the Company has a pipeline of over 250 ideas for innovation.
The Company is experiencing hypergrowth in the early stages as it continues penetration in the sustainable, plant-based multi-serve meals market which includes cauliflower-based pasta, pizza, meats, food bowls as well as frozen Mexican foods. The pandemic introduced many home diners to the brand but the COVID vaccine-led recovery should accelerate its growth.
The Company has acquired two more facilities, bringing it a total of 275,000 square feet within which to expand production capacity. Combined with a new marketing wave, the Company sets out to establish its brand. Tattooed Chef products can be found in popular retailers like Target (NYSE:TGT), Costco (NASDAQ:COST), Walmart (NYSE:WMT), Sam’s Club stores, and recently in Kroger’s (NYSE: KR). Prudent investors looking for exposure to the plant-based revolution can watch for opportunistic pullbacks to scale into a position.
Q1 Fiscal 2021 Earnings Release
On May 21, 2021, Tattooed Chef released its fiscal first-quarter 2022 results for the quarter ending March 2021. The Company reported an earnings-per-share (EPS) loss of (-$0.10) excluding non-recurring items versus consensus analyst estimates for a loss of (-$0.02), a (-$0.12) miss. Revenues grew 58.7% year-over-year (YoY) to $52.7 million beating analyst estimates for $46.4 million.
Tattooed Chef CEO, Sam Galletti stated:
“Branded revenue increased 105% in the first quarter across the mass, club, and grocery channels driven by successful product launches, increased distribution, and a promotion at a large club chain. We are executing on our growth strategy to increase distribution, build brand awareness, expand manufacturing capabilities, and diversify our product portfolio through innovation.
"We are investing in the business today in order to support strong long-term growth, and we believe the recently announced strategic acquisition of Foods of New Mexico will help create meaningful shareholder value going forward.”
Tattooed Chef Founder and Chief Creative Officer, celebrity chef, Sarah Galletti added:
“We are revolutionizing plant-based eating with the Tattooed Chef brand by tapping into consumer preferences and constantly bringing new ideas to the market. Our recent product launches in retail have been very successful and with the addition of our new manufacturing capabilities with the Foods of New Mexico acquisition, we have a pipeline of over 250 plant-based innovation ideas including ambient products and snacks.”
Upside Guidance
Tattooed Chef provided upside guidance for full-year 2021 with revenues to come in between $235 to $242 million versus $224.20 million. Gross margins are expected between 20% to 25%.
Conference Call Takeaways
CEO Galletti set the tone, “When we launched the brand in 2017, we recognized an opportunity to revolutionize the way consumers think about plant-based food. The Tattooed Chef brand is for everyone and we attract consumers of all ages and demographics. It really resonates with both consumers and retailers and that has been apparent to our sales velocities and product launches to date.:
"The club channel requires much higher volume to stay on shelf compared to conventional retail and we continue to exceed retailer expectation. This gives us confidence as we enter new channels like grocery and meet the sales thresholds.”
He continued to elaborate on a niche, “Our portfolio of products from single soup bowls to vegetable blends, to plant-based pizzas offers retailers a variety of breakfast, lunch, dinner or snacking products. With our acquisition of New Mexico Food Distributers Inc. Karsten Tortilla Factory, LLC collectively referred to as Foods of New Mexico, we plan to expand further into the $20 billion Hispanic Southwest food sector and beyond.”
The two facilities enable the Company to expand the production capacity with its 118,500 total square feet of space. The Company expects Foods of New Mexico to bring in up to $200 million in additional annual revenues in the next two to three years. As of Q1 2021, Tattooed Chef branded products are in 6,065 stores with 31,000 points of distribution. By end of Q2 2021, the Company expects a total of 1,162 additional stores with 8,000 new points of distribution including large grocery chains.
Product Mix Expansion
The original Tattooed Chef, Sarah Galletti stated, “We create food we want to eat and as consumers' preferences change, so do ours. Plant-based food does not have to be boring and with Tattooed Chef it's not. Our food is exciting no longer for the 1% and it's Chef created.
"At the end of Q1, we had a total of 42 Tattooed Chef branded SKUs and by the end of Q2, we will have 54. This includes five new 20 ounce plant-based multi-serve meals, Cauliflower spaghetti with plant-based Bolognese, Sweet Potato Gnocchi with plant-based butter and sage, Cauliflower Gnocchi Quattro Formagi, Chickpea pasta with plant-based Sausage Ragu and Riced Cauliflower Burrito blend that are now available for purchase at Target stores nationwide.
"These skillet mills feature a variety of our innovative plant-based alternatives with plant-based beef and sausage, plant-based butter and alternative rice and pasta. These multi-serve meals are different yet familiar to consumers. They are truly nostalgic innovation. We created our own pasta alternatives that we believe are better than anything else on the market today. Following our six bowls launched in Target in March, we also recently launched our new Pesto Harvest Bowl and a plant-based Hangover Bowl as well as a four pack of Cauliflower Mac & Cheese and our plant based burrito bowls at Target. This brings our total SKUs offered at Target to 17.”
TTCF Opportunistic Pullback Levels
Using the rifle charts on weekly and daily charts can provide a near-term perspective of the playing field for TTCF stock. The weekly rifle chart is compressing as the Bollinger® Bands (BBs) contract. The weekly breakout peaked just below the $24.49 Fibonacci (fib) level as the weekly market structure high (MSH) sell triggered under $19.70.
Incidentally, the weekly market structure low (MSL) buy triggered above the $18.30 level. The weekly 5-period moving average (MA) is sloping down at $20.06 as it overshoots the 15-period MA at $19.76. The daily rifle chart has been in a downtrend with a falling 5-period MA at $19.65 with a stochastic mini inverse pup pointing at the daily lower BBs at the $18.58 fib.
Prudent investors can monitor for opportunistic pullback levels at the $18.58 fib, $17.96 fib, $17.51 level, $16.69 fib, $15.43 fib, and the $14.09 fib. The upside trajectories range from the $22.51 level up to the $29.00 fib level.