Is Weber Stock a Good Buy for Long-Term Investors?



ohoutdoor grill business Weber (NYSE: WEBR) held its IPO in August. The shares have been trading down around 20% since then. In this segment of Backstage Pass, registered on November, 1st, contributors Toby Bordelon, Danny Vena, and Jose Najarro discuss key highlights investors need to know when considering this company for their portfolio.

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Toby Bordelon: Let’s look at our next venture here. Where did I put this business? We are talking about a company that I think everyone here is familiar with. You will recognize the name of this company. It’s Weber Grill. What are they doing?

They are an outdoor cooking company. They grill, Weber grill. You’ve probably seen them, you probably know the brand. For a long time, they were known for these coal mines. My dad had one, they last a long time, good stuff if you like charcoal grilling. Since then they have moved on to things like gas grills and pellet grills new things for them. They have been around for 70 years.

It’s a 70-year-old business. Very solid, they have simply never been public. 24% global market share, very strong brand. They sell in 78 countries. About 50% of their income comes from outside the United States, so it’s not just like, “Yeah, we sell to 78 countries, but we sell five grills in Canada. No, I mean, it’s a legitimate global business here.

In 2020 they introduced a connected grill platform, there is an app that walks you through some things, you control the grill. Genesis is the grill. I think it’s even Genesis II, maybe. I thought about buying one but my wife wouldn’t let me. I have one Traeger (NYSE: COOK).

I wanted something because if you have a Traeger it’s hard to heat up. They don’t burn as well so I was going to get something else and his stance was, “You can have an expensive grill and a cheap grill, but not two expensive grills.” So here we are. However, Christmas is coming soon, so maybe we can change that for the New Year.

They do a lot of work for their direct-to-consumer channel. They sell online. They own and operate independent stores under the Weber brand. Weber, they also have restaurants. Now, these are independently managed licenses, and I think they’re mostly in the Chicago area. I remember the last time I was in Chicago I wanted to go and couldn’t get it to work. But they cook on the grill, it looks cool. $ 875 million, eight market caps, so not a big company, small enough. Check this out though, you look at the finances, they had some good third quarter sales, which they just published.

93% of turnover is up and net income is down quite substantially. This stuff maybe goes back to what we’re talking about, once you’re public you start to see things start to happen. They have a lot of debt, that’s a concern I have. The debt is quite large. $ 1.2 billion in debt versus $ 134 million in cash, you have to be careful. Cash flow from operations is going down, but they say this is due to the normalization of inventory levels like we’ve talked about and the supply chain issues we’ve seen.

It may be a good thing. They expect their annual sales to reach nearly $ 2 billion, which will be a 30% increase from last year. Demand is at record levels according to management. On the surface, it looks pretty good. Last year was a pretty good year for grilling. You think about the pandemic, you couldn’t go out to eat, you couldn’t go to a restaurant. You might think that if I’m going to cook, I’m going to cook well. My money at the restaurant isn’t going to buy me a new grill, because that’s what I’m doing for the next few months.

People did that. The fact that we’re still seeing this sales growth compared to 2020, I think, is pretty good. It’s definitely something that’s on my watch list, but I don’t like finances, I don’t like debt. I want to see some improvement here before I’m ready to say, when I will buy this business and make it part of my portfolio. But the one I wanted to watch, because I just have a soft spot for Weber grills.

It’s that good old American grill brand that’s been around forever. Anyone who cooks outdoors, I know you’ve heard of it. If you don’t have Weber, I know you’ve heard of this company. One potentially to keep in mind, but watch the financials. Let’s take another quarter or two before we say this will be where we want to go.

Danny Vena: It’s exactly that. In fact, I certainly have a Weber in my backyard. In fact, I’ve owned a Weber barbecue pretty much all of my adult life when I wasn’t in the military. I have a grill, I love Weber grills, I love the options they have. They have everything from an entry-level grill that costs next to nothing to several thousand dollars to grills with all the bells and whistles you could imagine on a grill. I had the same concerns as you.

This is another one of those instances where a business experienced a huge acceleration in their growth during the pandemic for exactly the reasons you stated, and I certainly want to watch their growth normalize and see what it is going to be after the pandemic. pandemic.

José Najarro: Toby, quick question. I live here on the east coast. In the fall and winter, I hate it because I can’t go out and grill. I was wondering, I never really watched it. I also have a Weber outside, and it’s usually spring one of my favorite times, super easy to use. Do they have anything like indoor use? I know before the pandemic, where I’m pretty sure a lot of my friends lived in places like apartments and stuff like that, somewhere they can’t have a grill.

Do they have any products that cater to this type of consumer who might want to taste Weber Grill but inside or not in a place where they can have it outside?

Bordeaux: They do. It won’t give you the same, but they do have a series of electric grills. Basically these are electric grills, similar I guess to innovators in this category you would say the George Foreman Grill. But they have a series of these for you to plug in, some can be used outdoors, some indoors.

I think I saw one that almost looks like the kettle grill. It is designed for outdoor use, but it is designed as a balcony where they say you can’t have a grill, but if you just plug it in and you still have it outside it is fine. . These exist. If you are looking for this grill, like grill brands, grill style, maybe this is something worth buying one for your kitchen for things inside.

You can Jose, and you can get it from Weber depending on what grill model you have. They will sell you props like no one else because they are high margin products. You can get insulating blankets to throw over your grill to help regulate this temperature. It doesn’t help you when you have to go out in the snow. [laughs] But you can’t use an insulating blanket for the grills, so you’re not using that much fuel if you just insist on having smoke ribs in January.

Najarro: I’m not sure if I’ll take a look at the stock, but maybe I’ll definitely take a look at those products you just mentioned. [laughs]

Vena: Then after doing that, maybe people will get enough stock because Jose went out and bought this grill. [laughs] It could have that effect.

Danny Vena has no position in any of the stocks mentioned. Jose najarro has no position in any of the stocks mentioned. Rachel Warren has no position in any of the stocks mentioned. Toby Bordelon has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.



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