This is just a tough time to be in food. A protein glut is pressuring companies like Tyson
Sales dropped 2% this time around. Though sales of bananas were up a bit, and pineapples up a bit more, other categories saw sales declines. Making matters worse, high packaging, fuel, and transport costs continue to erode gross margins. On the operating income line, an impairment charge means things aren't quite as bad as they look, but they're still certainly bad enough.
There's no shortage of threats to Fresh Del Monte's main business lines. Price competition in pineapples continues at a fierce pace, and the banana market has always been both highly competitive and highly vulnerable to disease and weather. While Fresh Del Monte is certainly doing the right thing in trying to move to more value-added business with customers like Jack in the Box and Sonic
I've thought about taking a flier on Chiquita
Might there be value here? After all, it's often best to buy when things look worst. Trouble is, this will perpetually be a volatile commodity business. One hurricane can wreck a year's earnings. Moreover, when your average consumer really can't distinguish between Fresh Del Monte, Dole, or Chiquita products, how much leverage do you have when you're sitting across the table from representatives of Wal-Mart
For more Foolish fruits of knowledge:
- Smithfield Looks for Deliverance From Protein Glut
- Fresh Del Monte Wilts
- Chiquita Brands: Relatively More Appealing
Fool contributor Stephen Simpson has no financial interest in any stocks mentioned (that means he's neither long nor short the shares). Fresh Del Monte is a former Hidden Gems pick.