Consumer tastes are shifting, and lower-income consumers may have to cut back on big spending this year amid a rise in credit card delinquencies. For higher-income homes, some areas won’t see much of a cutback in spending at all.
The most likely place to hold up is with fine dining, even fine at home dining. Upper-income homes continue to spend well on high-end menu items. That bodes well for premium ingredient providers.
One such player is Chef’s Warehouse (CHEF), which distributes higher-end food items to restaurants and upscale stores, as well as an online portal for direct sales.
That includes specialty meats and cheeses, and unique products like specialty oils and vinegars among others.
Earnings have surged 93% over the past year, and revenues have inched up 6%.Profit margins are currently low, but improving earnings could mean better returns for investors in the years ahead.
Chef’s Warehouse currently trades at two-thirds its price-to-sales, indicating that there’s still more room for shares to run after a 65% rally in 2024.
Action to take: Momentum investors may like shares here, and the stock should continue to trend higher as high-income homes continue to spend on fine dining and high-quality food.
For traders, the April $55 calls, last trading for about $1.20, could see mid-double-digit returns or better on a continued rally in the spring.
Disclosure: The author of this article has no position in the company mentioned here, but may trade after the next 72 hours. The author receives no compensation from any company mentioned in this article.