The Simply Good Foods Company ((SMPL)) has held its Q1 earnings call. Read on for the main highlights of the call.
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The Simply Good Foods Company’s latest earnings call conveyed a sentiment of cautious optimism, reflecting strong overall company performance with significant growth in net sales. The Quest and OWYN brands were pivotal in driving this growth, although the Atkins brand faces challenges with anticipated declines. The company is maintaining a focus on long-term growth despite these hurdles.
Strong Net Sales Growth
Simply Good Foods reported an impressive 10.6% increase in total net sales, largely propelled by the successful acquisition of Only What You Need (OWYN). While legacy sales remained stable year-over-year, the acquisition played a crucial role in this positive outcome.
Quest Brand Performance
The Quest brand demonstrated robust growth, achieving a 10% increase in retail takeaway. Notably, Quest chips surged by 26% and e-commerce sales rose by 18%, highlighting the brand’s strong market presence and consumer demand.
OWYN Acquisition Success
OWYN has emerged as a key player in the sports nutrition sector, with retail takeaway growing by an impressive 67%. This growth has positioned OWYN as the third largest sports nutrition multipack brand in the U.S., underscoring the strategic value of the acquisition.
Gross Margin Improvement
The company reported a first-quarter gross margin of 38.2%, surpassing forecasts. This improvement was driven by lower-than-anticipated costs for ingredients and packaging, showcasing effective cost management strategies.
Adjusted EBITDA Growth
Adjusted EBITDA saw a 13.1% rise, bolstered by increased gross profits and the inclusion of OWYN. This growth underscores the company’s operational efficiency and strategic investments.
Atkins Brand Challenges
The Atkins brand faced a 4% decline in retail takeaway, with projections of further high single-digit declines in fiscal year 2025. This is attributed to strategic shifts involving reduced low ROI investments and distribution losses.
Shipment Timing Issues
Legacy Q1 net sales were affected by shipment timing issues, leading to a 3 percentage point shortfall. This highlights the importance of logistical precision in maintaining sales momentum.
Increased Input Cost Inflation
The company anticipates input cost inflation in fiscal year 2025, which is expected to exert pressure on gross margins in the upcoming quarters. This presents a potential challenge that the company must navigate carefully.
Guidance and Future Outlook
Looking ahead, Simply Good Foods provided guidance, expecting net sales growth in the range of 4% to 6% for fiscal year 2025, with adjusted EBITDA growth projected to slightly exceed net sales. Despite the anticipated input cost inflation, the company remains optimistic about its nutritional snacking segment, forecasting retail takeaway growth for Quest to be between 9% and 10%.
In conclusion, The Simply Good Foods Company’s earnings call painted a picture of cautious optimism, driven by strong performances from Quest and OWYN. While challenges exist, particularly with the Atkins brand and input cost inflation, the company remains focused on sustaining its growth trajectory and leveraging its strategic acquisitions.
