Uncontested: Nathan’s Stock Up 50% as Hot Dogs Win July 4th
The Fourth of July represents a celebration of Americans’ independence from the British Empire. Also celebrating this holiday: shareholders of the publicly traded Nathan’s Famous, which will be in the spotlight with its annual hot dog eating contest, featuring Joey Chestnut, the Tiger Woods of eating.
Nathan’s stock is up 50% over the last five quarters, as fans returned en masse to sporting events, amusement parks and movie theaters to consume tubular meats following COVID-19 capacity restrictions. Annual revenue dipped 27% during the first 12 months of COVID-19 but has rebounded 73% over the last two years.
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The company started in 1916 as a stand that sold hot dogs for a nickel. Nathan’s is closely associated with New York City and Coney Island, but it distributes its products to all 50 states and 18 countries.
Last month, the company posted its fiscal year financial results. Revenue was $130.8 million, up 14%, while net income rose 15% to $34.4 million. Nathan’s reports its business in four separate segments, led by its “Branded product program.” It represents the sale of hot dogs to the foodservice industry and had revenue of $78.9 million last year with goods sold at more than 65,000 locations. Product licensing ($33.5 million) and restaurant operations ($16.5 million) were the next two biggest. The company had four company-owned restaurants, 239 franchised restaurants and 287 virtual kitchens, as of the end of March 2022.
Nathan’s earnings are almost entirely derived from the product licensing segment—Smithfield Foods is the most significant agreement—where companies pay a licensing fee to use the famous name.
“As we seek to continue to expand and pursue profitable, new opportunities, we will retain our steadfast commitment to quality and endeavor to serve our shareholders responsibly,” Eric Gatoff, Nathan’s Famous CEO, wrote to shareholders in the company’s 2022 annual report. Gatoff has been CEO since 2007.
Nathan’s has a small share of the global hot dog and sausage game, which had estimated sales of $77 billion last year, according to a recent report from Coherent Market Insights. It is projected to grow 3.6% annually to $103 billion by 2030. The biggest regions for consumption are North America (35% of the total), Asia Pacific (25%) and Europe (20%). Hormel Foods, ConAgra Foods, Nestle and Tyson Foods rank among the biggest players in the industry.
Nathan’s enterprise value is $377 million, and the company is part of the Russell 2000, an index of small-cap stocks. Insiders own 32% of Nathan’s shares, led by its current chairman, Howard Lorber, with 24%.
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