What happened
Tattooed Chef (TTCF 4900.00%) stock beat the market in early trading on Wednesday, rising 15% by 11 a.m. ET compared to a flat S&P 500. The rally erased only a small portion of recent losses. Shares are still down over 50% so far in 2022.
It was powered by news that the plant-based foods specialist has won a bigger distribution deal with the world's biggest retailer.
So what
Tattooed Chef stuck an expanded deal with Walmart, the company said in a late Tuesday press release. The move will significantly boost its presence in the frozen food section and put its brands in more of the mega-retailer's stores.
Tattooed Chef products will now number 13, up from five, and will be available at 2,000 locations rather than the current 300-store footprint. The company also announced that it has acquired a new, established manufacturing and storage facility in New Mexico.
Now what
Tattooed Chef is likely to see an immediate sales boost from the wider availability of its products at Walmart locations. However, investors have two big concerns today that are weighing on the stock.
First, consumers' appetite for plant-based foods isn't as high as it was in prior phases of the pandemic. For example, Beyond Meat has reported slowing demand and expanding net losses in recent quarters.
In contrast, Tattooed Chef grew sales by 16% in the most recent quarter, yet that figure represented a slowdown from the prior quarter's 37% spike.
The other big worry is that Tattooed Chef isn't yet profitable, and it could be many more quarters before sustainable profitability, mainly as a by-product of expanding sales.
Today's news suggests that these sales gains may stabilize soon and start expanding again toward 20% or more. But some investors might prefer watching the stock from the sidelines while they wait for more concrete evidence of profitability.
