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Can Mama's Creations Push Gross Margin Into the High-20% Range?
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Key Takeaways
Mama's Creations' gross margin improved sequentially to 24% in fiscal Q2 from 23.6% in fiscal Q1.
Mama's Creations is targeting a mid-to-high-20% corporate gross margin as sequential improvement continues.
Trade spending increased more than $1 million year over year, weighing on gross margin during the quarter.
Mama's Creations, Inc. (MAMA - Free Report) is working toward a mid-to-high-20% corporate gross margin, with the second quarter of fiscal 2027 showing sequential progress. Gross margin improved to 24% in the fiscal second quarter from 23.6% in the fiscal first quarter. Gross profit rose 49.1% year over year to $13.1 million, although gross margin remained below the prior-year level of 24.9%.
Several identifiable factors separate the current margin level from the targeted range. One is trade spending. Mama's Creations shifted about $0.5 million from marketing into trade during the quarter, representing about one point of gross margin. Overall, trade spending was more than $1 million above the prior-year level.
Product mix is another key factor. The company is seeking to increase sales of chicken “bottoms,” which allow greater utilization of trimming operations. One additional day of trimming in a five-day workweek equates to roughly 1 percentage point of margin. Current trimming activity remains at about one to two days, leaving an indicated 2-3 percentage points of additional margin opportunity if the mix of chicken-bottom sales increases. Chicken-bottom sales have already risen more than $10 million from a year ago.
Bay Shore represents the third lever. The facility remains roughly 1 percentage point below the corporate average, leaving another margin improvement opportunity as it moves toward corporate-average margins.
Taken together, the three factors represent roughly 4-5 percentage points of margin opportunity, which would move gross margin from 24% to 28-29%. Reaching that range depends on trade-spending levels, a higher mix of chicken-bottom sales and further progress in bringing Bay Shore closer to the corporate average.
Shares of this Zacks Rank #2 (Buy) company have gained 22.8% in the past year compared with the broader Consumer Staples sector and the S&P 500 index’s 4.2% and 15.6% growth, respectively. MAMA also outperformed the industry’s decline of 22.5% over the same period.
MAMA Stock's Past Year Performance
Image Source: Zacks Investment Research
Is Mama's Creations a Value Play Stock?
Mama's Creations currently trades at a forward 12-month P/E ratio of 39.45, way above the industry’s average of 13.92. This valuation places the stock at a premium relative to peers, indicating broader market expectations around its business stability and ability to navigate current cost and demand dynamics.
MAMA P/E Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
Other Stocks to Consider
The Chefs' Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. At present, CHEF flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Chefs' Warehouse’s current fiscal-year sales and earnings implies growth of 10.8% and 33.7%, respectively, from the year-ago reported figures. Chefs' Warehouse delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Luckin Coffee Inc. (LKNCY - Free Report) offers retail services of freshly brewed drinks and pre-made food and beverage items in the People's Republic of China. The company currently sports a Zacks Rank of 1. LKNCY delivered a trailing four-quarter earnings surprise of 6.6%, on average.
The Zacks Consensus Estimate for Luckin Coffee’s current financial-year sales and earnings indicates growth of 33.3% and 40.8%, respectively, from the prior-year reported levels.
Lamb Weston Holdings, Inc. (LW - Free Report) engages in the production, distribution and marketing of frozen potato products in the United States, Canada, Mexico and internationally, and presently carries a Zacks Rank of 2. LW delivered a trailing four-quarter earnings surprise of 24.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year earnings indicates growth of 1.7% from the year-ago numbers.
View the Zacks #1 Rank List
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Can Mama's Creations Push Gross Margin Into the High-20% Range?
Key Takeaways
Mama's Creations, Inc. (MAMA - Free Report) is working toward a mid-to-high-20% corporate gross margin, with the second quarter of fiscal 2027 showing sequential progress. Gross margin improved to 24% in the fiscal second quarter from 23.6% in the fiscal first quarter. Gross profit rose 49.1% year over year to $13.1 million, although gross margin remained below the prior-year level of 24.9%.
Several identifiable factors separate the current margin level from the targeted range. One is trade spending. Mama's Creations shifted about $0.5 million from marketing into trade during the quarter, representing about one point of gross margin. Overall, trade spending was more than $1 million above the prior-year level.
Product mix is another key factor. The company is seeking to increase sales of chicken “bottoms,” which allow greater utilization of trimming operations. One additional day of trimming in a five-day workweek equates to roughly 1 percentage point of margin. Current trimming activity remains at about one to two days, leaving an indicated 2-3 percentage points of additional margin opportunity if the mix of chicken-bottom sales increases. Chicken-bottom sales have already risen more than $10 million from a year ago.
Bay Shore represents the third lever. The facility remains roughly 1 percentage point below the corporate average, leaving another margin improvement opportunity as it moves toward corporate-average margins.
Taken together, the three factors represent roughly 4-5 percentage points of margin opportunity, which would move gross margin from 24% to 28-29%. Reaching that range depends on trade-spending levels, a higher mix of chicken-bottom sales and further progress in bringing Bay Shore closer to the corporate average.
Mama's Creations’ Zacks Rank & Share Price Performance
Shares of this Zacks Rank #2 (Buy) company have gained 22.8% in the past year compared with the broader Consumer Staples sector and the S&P 500 index’s 4.2% and 15.6% growth, respectively. MAMA also outperformed the industry’s decline of 22.5% over the same period.
MAMA Stock's Past Year Performance
Image Source: Zacks Investment Research
Is Mama's Creations a Value Play Stock?
Mama's Creations currently trades at a forward 12-month P/E ratio of 39.45, way above the industry’s average of 13.92. This valuation places the stock at a premium relative to peers, indicating broader market expectations around its business stability and ability to navigate current cost and demand dynamics.
MAMA P/E Ratio (Forward 12 Months)
Image Source: Zacks Investment Research
Other Stocks to Consider
The Chefs' Warehouse, Inc. (CHEF - Free Report) distributes specialty food and center-of-the-plate products in the United States, the Middle East and Canada. At present, CHEF flaunts a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The consensus estimate for Chefs' Warehouse’s current fiscal-year sales and earnings implies growth of 10.8% and 33.7%, respectively, from the year-ago reported figures. Chefs' Warehouse delivered a trailing four-quarter earnings surprise of 30.4%, on average.
Luckin Coffee Inc. (LKNCY - Free Report) offers retail services of freshly brewed drinks and pre-made food and beverage items in the People's Republic of China. The company currently sports a Zacks Rank of 1. LKNCY delivered a trailing four-quarter earnings surprise of 6.6%, on average.
The Zacks Consensus Estimate for Luckin Coffee’s current financial-year sales and earnings indicates growth of 33.3% and 40.8%, respectively, from the prior-year reported levels.
Lamb Weston Holdings, Inc. (LW - Free Report) engages in the production, distribution and marketing of frozen potato products in the United States, Canada, Mexico and internationally, and presently carries a Zacks Rank of 2. LW delivered a trailing four-quarter earnings surprise of 24.6%, on average.
The Zacks Consensus Estimate for Lamb Weston’s current fiscal-year earnings indicates growth of 1.7% from the year-ago numbers.