Bridgford Foods Corporation (NASDAQ:BRID) is a diversified food company that operates in two primary business segments: Frozen Food Products and Snack Food Products. The company has a long and storied history, having been founded in 1932 and publicly traded since 1952. Over the decades, Bridgford Foods has established itself as a leading producer and distributor of a wide range of food products, including biscuits, bread dough, dry sausage, beef jerky, and other convenience foods.

Business Overview

The Frozen Food Products segment primarily manufactures and distributes biscuits, bread dough, and roll dough items, as well as shelf-stable sandwiches. This segment serves a diverse customer base, including food service and retail distributors across the United States. The Snack Food Products segment, on the other hand, focuses on the processing and distribution of meat and other convenience foods, such as jerky, sausage, and pepperoni products. This segment sells its products through a direct-store-delivery network and customer-owned distribution centers, reaching approximately 20,000 supermarkets, mass merchandise, and convenience retail stores nationwide.

Financials

In the fiscal year ended November 3, 2023, Bridgford Foods reported annual revenue of 251,636,000, a slight decrease from the previous year's figure of 253,102,000. Despite the revenue decline, the company managed to maintain profitability, reporting annual net income of 3,474,000, compared to 3,589,000 in the prior year. The company's operating cash flow for the fiscal year was 3,985,000, while its free cash flow stood at 1,382,000.

Quarterly Performance

For the twelve weeks ended April 19, 2024, Bridgford Foods reported net sales of 47,314,000, a decrease of 14.8% compared to the same period in the prior year. The Frozen Food Products segment saw an 8.4% increase in net sales to 12,905,000, while the Snack Food Products segment experienced a 21.1% decline in net sales to 34,409,000. The company's gross margin decreased to 22.7% in the second quarter of fiscal year 2024, compared to 27.8% in the same period of the previous year.

Inflationary Pressures and Operational Challenges

Bridgford Foods, like many other food companies, has been grappling with the impact of rising inflation, particularly in the areas of labor, freight, and key raw materials. The company has faced significant increases in the cost of commodities such as meat and flour, which have put pressure on its gross margins. To mitigate these challenges, Bridgford Foods has implemented price increases, but the company has faced difficulties in passing on the full extent of these cost increases to its customers due to competitive pressures and consumer price sensitivity.

In addition to inflationary pressures, Bridgford Foods has also been navigating supply chain disruptions and labor shortages, which have impacted its ability to meet customer demand and maintain operational efficiency. The company has taken steps to address these challenges, including investing in its transportation and logistics capabilities, as well as implementing strategies to attract and retain talent.

Liquidity

As of April 19, 2024, Bridgford Foods had 13,789,000 in cash and cash equivalents and 66,238,000 in net working capital. The company has a revolving credit facility with Wells Fargo Bank, N.A., which provides up to 7,500,000 in borrowing capacity. As of the end of the second quarter of fiscal year 2024, the company had 3,401,000 in outstanding equipment notes payable, with 1,061,000 classified as current debt.

Bridgford Foods' liquidity position has enabled it to navigate the current economic environment, though the company remains vigilant in monitoring its cash flow and exploring options to enhance its financial flexibility, such as mortgaging real estate or seeking additional borrowing capacity, if necessary.

Segment Performance

The Frozen Food Products segment has demonstrated resilience, with a 3.8% increase in net sales to 27,304,000 for the twenty-four weeks ended April 19, 2024, compared to the same period in the prior year. This growth was driven by higher selling prices per pound and a slight increase in unit sales volume. The Snack Food Products segment, however, experienced a 17.6% decline in net sales to 74,852,000 during the same period, primarily due to lower unit sales volume and a decrease in the weighted average selling price per pound.

Geographic Breakdown

Bridgford Foods' operations are primarily focused within the United States, with all of its net sales for the twenty-four weeks ended April 19, 2024, being derived from the domestic market. The company does not currently have a significant international presence.

Risks and Challenges

While Bridgford Foods has demonstrated its ability to navigate challenging market conditions, the company faces several risks and uncertainties that could impact its future performance. These include continued inflationary pressures, ongoing supply chain disruptions, labor shortages, and the potential for further changes in consumer spending patterns due to macroeconomic factors.

Additionally, the company's reliance on a limited number of large customers, such as Walmart and Dollar General, which accounted for 28.4% and 25.1% of net sales, respectively, in the twenty-four weeks ended April 19, 2024, exposes Bridgford Foods to concentration risk. The loss of or a significant reduction in business from these key customers could have a material adverse effect on the company's financial results.

Outlook

Bridgford Foods has not provided specific financial guidance for the remainder of fiscal year 2024. However, the company has indicated that it will continue to monitor the evolving macroeconomic environment and take appropriate actions to mitigate the impact of inflationary pressures and supply chain challenges on its operations and financial performance.

Despite the near-term headwinds, Bridgford Foods remains committed to its long-term growth strategy, which includes investing in its production capabilities, expanding its product portfolio, and exploring opportunities to diversify its customer base. The company's strong liquidity position and experienced management team provide a solid foundation for navigating the current market conditions and positioning the business for future success.

Conclusion

Bridgford Foods Corporation is a well-established food company that has demonstrated its ability to adapt to changing market conditions. While the company faces near-term challenges related to inflation and supply chain disruptions, its diversified product portfolio, strong financial position, and experienced management team position it to weather the current storm and capitalize on future growth opportunities. Investors should closely monitor the company's progress in addressing these operational challenges and its ability to maintain profitability and generate positive cash flow in the face of a volatile economic environment.