Release Date: August 22, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Lancaster Colony Corp (LANC, Financial) achieved record net sales and gross profit for fiscal year 2024, with net sales growing 2.7% to $1.9 billion and gross profit increasing 11.3% to $432.3 million.
- The company saw a 4.8% increase in gross profit for the fourth quarter, driven by cost-saving initiatives and increased volumes.
- The retail segment experienced growth in licensed products, with sales for items like Chick-fil-A refrigerated dressings and Olive Garden dressings increasing significantly.
- Lancaster Colony Corp (LANC) successfully introduced new products, including Subway sandwich sauces and Texas Roadhouse steak sauces, which contributed to sales growth.
- The company maintained a debt-free balance sheet and ended the fiscal year with $163.4 million in cash, indicating strong financial health.
Negative Points
- Consolidated net sales for the fourth quarter declined by 40 basis points to $452.8 million, indicating a slight decrease in overall sales.
- The retail segment saw an 80 basis point decline in net sales, partly due to the exit from the perimeter bakery lines.
- Foodservice segment growth was offset by deflationary pricing, leading to a 210 basis point decline in revenue.
- The company recorded restructuring and impairment charges of $2.7 million related to the exit of certain product lines, impacting overall profitability.
- Selling, general, and administrative expenses decreased by 6.2%, but higher personnel and IT investments offset some of these savings.
Q & A Highlights
Q: Thinking about the foodservice segment, can you give us some color on what you expect from QSR in fiscal '25?
A: We continue to believe that we can deliver low single-digit volume-led growth that will turn into sales growth in fiscal year '25. If the overall outlook improves, there's an opportunity for that low single-digit volume growth to become low to mid-single-digit volume growth. The mega trend of chicken continues to be a big part of our innovation activities.
Q: Can you offer any details on the cadence of growth for both retail and foodservice in '25?
A: We are projecting low single-digit volume growth for both segments throughout the year. We expect a little bit stronger front-half growth in our foodservice business, driven by limited-time offerings. Retail segment sales will benefit from volume growth led by our licensing program and new product introductions.
Q: Are any of your foodservice partners asking for price help with promotions?
A: Our limited-time offerings (LTOs) are usually at or better than our line average due to proprietary R&D work. We are focused on exciting menu items to drive traffic rather than discounting, as most operators are looking to drive traffic through menu excitement rather than price cuts.
Q: How did retail come in relative to internal expectations?
A: Retail was pretty much right on target. Consumption data through the period was very consistent with our expectations. We had one promotion with a retailer slip from Q4 into Q1, but it did not materially impact the overall results.
Q: Can you provide an update on the licensing pipeline?
A: We are thrilled with the performance of Chick-fil-A dressings and Subway sauces. Our partnership with Texas Roadhouse has expanded to include their popular rolls, which are currently in a three-state test and outperforming expectations. We continue to have discussions with other potential partners and will update as we progress.
Q: What is the outlook for SG&A efficiency in fiscal '25?
A: We expect SG&A as a percentage of revenue to remain in a similar range as fiscal '24. We will make critical investments in our IT infrastructure, funded in part by savings from the completion of Project Ascent.
Q: How significant is the opportunity for the new gluten-free Texas toast product?
A: The gluten-free Texas toast is a significant opportunity. We have developed a product that tastes nearly identical to our current item and have obtained a patent on the technology. This product opens up a new category for us, and we believe we can win on both taste and value.
Q: How do you plan to drive margin improvement in fiscal '25?
A: Given the neutral commodity outlook, margin improvement will come from productivity improvements in our manufacturing environment. We have several automation projects in flight that will come online with benefits as the year progresses.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
