NEW YORK (TheStreet) -- Last week Bank of America Merrill Lynch added Hain Celestial (HAIN) to its US1 list of best ideas. The stock jumped higher on the news. Shares, at $68, are up 16.6% for the year to date.
Merrill thinks the company will face easier comparisons in the back half of the year, which would make Hain's results look better and drive the stock higher. But I'm not so sure. The natural and organic retailer and distributor sector has taken a beating. Since Hain supplies many retailers in the organic sector, it cannot avoid the problems in the industry.
Stocks like Sprouts Farmer's Market (SFM), Fresh Market (TFM) and Whole Foods (WFM) are down between 17% and 21% year to date. Last quarter, for example, Sprout's reported a disappointing same-store sales figure of 0.1%. Whole Foods has been struggling for a while. The company announced it would launch a smaller format store with lower prices to attract a demographic that doesn't shop its stores.
Merrill argues there are over 100,000 retail distribution points offering natural and organic products and the number of points continues to grow. More locations selling Hain's products should help the company to continue its growth.
The organic food sector is estimated to grow (on an annualized basis) about 10% a year from 2000 to 2017. Within two years, the sector is expected to sell over $60 billion worth of goods. That compares with the packaged foods sector, which is only expected to grow 1% at best.