Strong Distribution Gains Underpin Real Good Food's FY23 Sales, Earnings Outlook: Analyst

William Blair analyst Jon Anderson reiterated Outperform rating on the shares of Real Good Food Company Inc RGF.
The company’s Q1 earnings quality was solid, with sales and gross margin above and the operating expense ratio higher than the analyst’s forecast.
Underpinned by strong distribution gains, the management’s reiteration on FY23 sales and earnings guidance is encouraging, said the analyst.
The 21% organic sales decline, the analyst noted, was primarily due to the timing of select promotional events that benefited last year’s sales.
The analyst said that a significantly improved gross margin rate in the quarter lends credence to the company’s profitability targets once manufacturing facilities are fully utilized.
The analyst believes Real Good can disrupt frozen food categories with on-trend high protein, low carbohydrate items, including entrées and breakfast sandwiches, aided by its food systems and manufacturing capabilities.
However, risks to the narrative includes, competition with limited time in market for the brand; execution complexity while building operating and production capabilities; and cost inflation and supply chain disruption.
Price Action: RGF shares are trading lower by 4.43% at $3.77 on the last check Monday.

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