Simply Good Foods Earnings Call: Mixed Sentiment and Growth

The Simply Good Foods Company ((SMPL)) has held its Q3 earnings call. Read on for the main highlights of the call.

The Simply Good Foods Company’s recent earnings call revealed a mixed sentiment, highlighting both achievements and challenges. The company reported strong performance and growth in its Quest and Owen brands, along with significant debt repayment and positive sales growth. However, these positive aspects were tempered by challenges with the Atkins brand, pressures on gross margins, and anticipated difficulties in the upcoming quarters.

Significant Net Sales Growth

The Simply Good Foods Company reported a notable 13.8% increase in net sales year-over-year. This growth was largely driven by the acquisition of Owen, which contributed 10%, and an additional 3.8% organic growth. The Quest and Owen brands demonstrated strong double-digit consumption growth, underscoring their importance to the company’s portfolio.

Quest Brand Performance

Quest, which accounts for 60% of the company’s net sales, delivered an impressive 11% consumption growth. The brand’s salty snacks platform saw a remarkable 31% growth, and Quest successfully expanded its distribution and merchandising efforts, further solidifying its market position.

Owen’s Contribution and Growth

Owen’s brand performance was another highlight, with retail takeaway increasing by 24%. The ready-to-drink shakes segment grew by over 20%, and distribution expanded by 18%, showcasing Owen’s robust market presence and growth potential.

Debt Repayment and Stock Repurchase

In a strategic financial move, Simply Good Foods repaid $240 million of the $250 million borrowed for the Owen acquisition. Additionally, the company repurchased $24 million worth of stock, reflecting confidence in its financial stability and future prospects.

Atkins Brand Decline

The Atkins brand faced challenges, with a 13% year-over-year decline in consumption during Q3. This decline was attributed to distribution losses and the absence of prior high-volume merchandising events, signaling a need for strategic adjustments.

Gross Margin Pressure

The company experienced a decline in gross margin by 350 basis points, primarily due to elevated input costs, including cocoa and whey. These pressures were only partially mitigated by productivity and pricing strategies, indicating ongoing challenges in managing costs.

Anticipated Challenges in Q4 and FY 2026

Looking ahead, Simply Good Foods anticipates continued challenges, including double-digit declines for the Atkins brand in FY 2026 due to distribution cuts. Additionally, margin pressures from tariffs and inflation are expected to persist in Q4, posing further hurdles.

Forward-Looking Guidance

The company’s fiscal year 2025 guidance reflects expected total net sales growth of 8.5% to 9.5% and adjusted EBITDA growth of 4% to 5%. Despite inflationary pressures, Simply Good Foods remains optimistic about long-term growth, driven by its Quest and Owen brands, which together constitute 70% of net sales and continue to show strong double-digit growth.

In summary, The Simply Good Foods Company’s earnings call presented a balanced view of its current performance and future outlook. While the Quest and Owen brands continue to drive growth and financial stability, challenges with the Atkins brand and margin pressures remain areas of concern. The company’s strategic focus on productivity and cost management will be crucial in navigating these challenges and achieving its growth targets.