Summary
Tootsie Roll Industries has an impressive record of financial stability, and the overall risk to the enterprise is extremely low.
The firm is a quality name, but this comes at a hefty premium that won’t be worth it to most investors.
This could be a solid prospect for investors interested in building a defensive portfolio, though.
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memoriesarecaptured/iStock Editorial via Getty Images Few brands are as iconic and well known as Tootsie Roll. Owned by Tootsie Roll Industries ( TR ), the product has been a staple of the American candy industry for more than 100 years. But the company is more than just that name brand. The company owns a wide portfolio of different products, some well-known and others less so. And in recent years, the enterprise has exhibited a level of stability and consistency that is rare for investors to enjoy. Having said that, while the company does look like a safe bet for investors who are preparing for times of turbulence, shares are otherwise rather expensive at this moment. Because of this, it seems to make more sense for investors who are building a defensive portfolio rather than those looking for long term capital appreciation. Taking a bite out of Tootsie Roll Industries
Today, Tootsie Roll Industries owns a large portfolio of products in the food space. In addition to their namesake Tootsie Roll brand, the company owns products such as Tootsie Pops, Child’s Play, Charms, Double Bubble, Razzles, Sugar Babies, and so much more. These products are sold through approximately 30 food and grocery brokers as well as by the company itself to its more than 2,000 customers spread throughout the US, Canada, and Mexico.
Although the company is well diversified in terms of its revenue sources, one major player accounts for a sizable chunk of its overall sales. As you might have guessed, this customer is Walmart ( WMT ), which accounted for 23.5% of the company’s revenue in 2020. Its next largest customer was Dollar Tree ( DLTR ), which represented 11.7% of sales. It is worth noting that some of these sales from both large retailers were ultimately then sold to a large national grocery wholesaler named McLane Company. As a result, that firm accounted for 22.1% of the company’s overall revenue, with obvious overlap from Walmart and Dollar Tree.
In order to manufacture the products that it makes, Tootsie Roll Industries has created a small network of properties. In all, it boasts six manufacturing, warehousing, and distribution facilities outside of its principal one, all of which it owns instead of leases. Combined space from these properties is 1.45 million square feet. This is in addition to the company’s main asset in Chicago that comes out to 2.35 million square feet. It also leases one property, also located in Chicago, that is 137,000 square feet in size. *Created by Author
Between 2016 and 2019, revenue was incredibly stable, ranging from a low point of $515.25 million to a high point of $523.62 million. But then, as a result of the COVID-19 pandemic, sales dropped in 2020. But the decline was fairly modest compared to what most companies in most industries experienced. For the year, revenue came in at $467.43 million. Fortunately for investors, that decline in revenue appears to be over. In the first nine months of the company’s 2021 fiscal year, for instance, sales came in at $402.85 million. That represents an increase of 17.7% compared to the $342.20 million generated the same time one year earlier. In fact, if the fourth quarter this year looks as good as the rest of the quarters have been relative to the 2020 fiscal year, sales might end up this year as high as $550 million or so. But management has not provided any official guidance that I could see.
When it comes to profitability, the picture has been similar. Net income ranged between a low point of $56.89 million and a high point of $80.86 million in the four years ending in 2019. However, if you take out a tax adjustment from 2017, the range would be from $56.89 million to $67.51 million. Even when revenue fell in 2020, net profits remained buoyant, coming in for that year at just under $59 million. For the current fiscal year, the picture looks similar. In the first nine months of the 2021 fiscal […]
source Tootsie Roll Industries: Solid For Defensive Investors
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