Analyst Note| Rebecca Scheuneman, CFA |
After Hostess’ first-quarter earnings report, we continue to believe that the coronavirus will not have a material impact on the firm’s results, either for fiscal 2020 or over the long term. While pantry-stocking provided a 2%-3% bump in first-quarter sales, the benefit was offset by a negative mix shift from single-pack to multipack and additional coronavirus costs. Furthermore, we expect the pandemic-related sales lift to subside in the second quarter as orders slow from convenience stores, which represent 43% of retail scanner sales, or about 30% of company sales. More importantly, in our view, the strong Hostess brand, which underpins our narrow moat rating, continued to perform well before pantry-stocking began, generating 4% growth heading into the demand surge and gaining 17 basis points of market share year over year to 18.5%.