On Friday, Bernstein SocGen Group reiterated its Outperform rating on The Simply Goods Group (NASDAQ: SMPL), sustaining a price target of $31.00. This target implies an upside approaching 50% compared to the stock's current trading level at $20.89. Notably, Simply Goods has experienced a stock price decline exceeding 35% over the past six months, reflecting investor concerns amid various operational challenges.
Bernstein's reaffirmation aligns with the company's steady fiscal year 2026 guidance, which ends in September. Management anticipates no significant changes to earnings forecasts for the coming fiscal year, indicating confidence in the underlying business performance fundamentals.
The firm's outlook indicates flat organic sales growth for FY26, a scenario attributed primarily to intentional reduction of low-velocity SKUs within its flagship Atkins brand. This SKU pruning is expected to suppress organic sales growth by around 5% this year; however, prospects for growth remain sound, with a turnaround expected early in FY26 as the brand rebounds.
One critical headwind highlighted is the compression of gross margins, which have dropped from roughly 41% in 2020/21 to a recent low near 32%. Management has expressed an intention to rebuild margins progressively over time, aiming to restore profitability levels observed in earlier periods.
Furthermore, the company is contending with elevated input cost pressures, particularly from cocoa-related ingredients. Prior to recent cocoa price increases, these ingredients accounted for approximately 4-5% of cost of goods sold, pointing to a notable impact on overall cost structure amidst recent commodity price surges.
In operational developments, Simply Goods has appointed former CEO Joe Scalzo as President and Chief Executive Officer, signaling a strategic move to reinvigorate the Atkins brand, which has faced distribution difficulties. Analysts at both Bernstein SocGen and Mizuho emphasize Scalzo’s return as a key factor potentially driving the brand's performance improvements. Mizuho maintained an Outperform rating while modestly lowering its price target to $30.00, reflecting peer multiple compression but recognizing the potential uplift from leadership continuity amid evolving market dynamics influenced by GLP-1 weight loss drug trends.
Overall, the outlook for Simply Goods Group balances caution due to recent performance and cost challenges against strategic leadership moves and reaffirmed guidance, suggesting a cautiously optimistic investment case for stakeholders.