Grill makers gearing up for all-American IPO

A Weber grill stands on a porch in Gloucester, Massachusetts, United States, July 13, 2021. REUTERS / Brian Snyder

NEW YORK, July 19 (Reuters Breakingviews) – Stock markets are serving up red meat to al fresco dining enthusiasts. Traeger and Weber, makers of backyard grilling machines, have both filed for an initial public offering. One is more trendy, while the other is bigger. Both sport the required IPO buzzwords about technology and recurring revenue streams. What one has in terms of market penetration and variety, the other makes up for with the cachet of the brand – suggesting they could end up with a similar valuation.

Traeger, based in Salt Lake City, specializes in pellet fueled grills. The company run by Jeremy Andrus sold 2 million grills in the United States between 2016 and 2020. Weber, based in Palatine, Illinois, and led by Chris Scherzinger, has sold 50 million grills worldwide, roughly two-thirds the United States. , where it has a 23% market share. Weber barbecues are aimed at a wider market: they run on gas, charcoal, wood pellets or electricity.

Both brands have pricing power. Take their gross margin – actually their profit margin on the products they manufacture. Traeger was at 41% and Weber at 44% in the six months leading up to March 31. After that, their finances are very different. Traeger’s revenue nearly doubled to $ 369 million in the six-month period ended March 31, and went from a loss to a small profit. Weber’s revenue rose 62% to $ 963 million and his profits tripled. Weber derives more than a quarter of its revenue from add-ons like fuel and utensils, compared to a fifth at Traeger.

In all of the preparation, Weber looks like a winner. Outdoor brands Yeti (YETI.N), Newell Brands (NWL.O) and Thor Industries (THO.N) are trading an average of 3 times expected sales this year, according to Refinitiv. If Weber’s pandemic-fueled growth fades to half its most recent 62% rate, it could generate $ 2.5 billion in revenue in the 12 months ending next March, making it is worth $ 7.5 billion. Trager, by the way, would only be worth $ 3 billion, unless he could argue that his luxury deserves a big bounty.

Wall Street has already chosen its winner. Weber’s latest filing has three of the top five underwriters for IPOs in the United States this year, namely JPMorgan, Goldman Sachs and Bank of America. Traeger’s owner, TGPX Holding I, has one: Morgan Stanley. There is room in the market for both grill makers, but being the larger and more established of the two, it may not be surprising that Weber has brought more fee-hungry banks to the backyard. .

To pursue @alpgomez on Twitter

NEWS CONTEXT

– Grill makers Weber and Traeger have both filed for IPOs in the United States.

–Weber reported revenue of $ 963 million for the six months ended March 31 and net profit of $ 73.8 million for the same period, according to a file released on July 12.

– TGPX Holdings I, owner of Traeger, reported revenue of $ 236 million and net profit of $ 38.9 million for the quarter ended March 31, based on a file released on 6 July. The company will change its name to Traeger once it goes public.

Editing by John Foley and Marjorie Backman

Reuters Breakingviews is the world’s leading source of financial agenda information. As the Reuters brand for financial commentary, we dissect big business and economic stories from around the world every day. A global team of around 30 correspondents in New York, London, Hong Kong and other major cities provide real-time expert analysis.

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