BRC Inc. (BRCC) engages in the purchasing, roasting, and selling of coffee, coffee accessories, and brand apparel. The company also engages in the production of media content, print journals, and podcasts and offers coffee-brewing equipment and outdoor gear.
The company, known for its commitment to supporting veterans, intends to grow its online marketing efforts and aims to grow its product supply capacity. The company recently filed to open two new store locations, which aligns with its goal of 78 stand-alone locations in the United States by 2023. In May, BRCC filed for an Orlando location as part of its Sun Belt expansion aim.
However, BRCC’s stock has declined 1.87%. Here are the factors that could affect BRCC’s performance in the near term:
Recent SPAC Merger
On February 9, special purpose acquisition company (SPAC) SilverBox Engaged Merger Corp I, sponsored by SilverBox Capital LLC and Engaged Capital LLC, declared the closing of its business combination with Black Rifle Coffee Company’s parent Authentic Brands LLC. The combined company “BRC Inc.” started trading on the New York Stock Exchange on February 10 under the “BRCC” ticker. The combination was expected to provide approximately $150 million in cash. The company intended to use it to support its digital-first, omnichannel strategy.
Bleak Bottomline
For the fiscal first quarter ended March 31, BRCC’s net revenue increased 34.9% year-over-year to $65.84 million. However, net income decreased substantially to a negative $256.83 million. Net loss per share attributable to class A common stock came in at $1.36. Adjusted EBITDA declined 372.3% from the same period the prior year to a negative $6.21 million.
Lawsuit
In May, West Coast investment company 1791 Management LLC filed a Securities Fraud and Market Manipulation Lawsuit against BRCC, charging the company with intentional violations of securities laws and fraud, which includes deliberate breach of contract, breach of fiduciary duty, and negligent misrepresentation.
POWR Ratings Reflect Bleak Prospects
BRCC’s POWR Ratings reflect this bleak outlook. The stock has an overall rating of F, equating to Strong Sell in our proprietary rating system. The POWR Ratings are calculated by considering 118 different factors, with each factor weighted to an optimal degree.
BRCC has a Growth grade of D in sync with its bleak bottom line and EBITDA growth in the last reported quarter.
In the 86-stock Food Makers industry, it is ranked #84.
Click here to see the additional POWR Ratings for BRCC (Value, Momentum, Stability, Sentiment, and Quality).
View all the top stocks in the Food Makers industry here.
Bottom Line
Although the new store locations might benefit the company, it might take some time to realize substantial gains. Moreover, the lawsuits against the company could make investors anxious. With analysts expecting its EPS to remain in the red at least until the fiscal year 2022, the stock might be best avoided at the moment.
How Does BRC Inc. (BRCC) Stack Up Against its Peers?
While BRCC has an overall POWR Rating of F, one might consider looking at its industry peers, Grupo Bimbo, S.A.B. de C.V. (GRBMF) and Industrias Bachoco S.A.B. de C.V. (IBA), which have an overall A (Strong Buy) rating, and Ajinomoto Co., Inc. (AJINY), which have an overall B (Buy) rating.
BRCC shares were trading at $9.90 per share on Tuesday afternoon, down $0.06 (-0.60%). Year-to-date, BRCC has declined -36.70%, versus a -12.28% rise in the benchmark S&P 500 index during the same period.
About the Author: Anushka Dutta
Anushka is an analyst whose interest in understanding the impact of broader economic changes on financial markets motivated her to pursue a career in investment research.
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