TreeHouse Foods, Inc. (NYSE: NYSE:THS) reported a challenging first quarter of 2024, with earnings falling short of analyst expectations, sending its shares 4.3% lower.
The company posted an adjusted EPS of -$0.03, which was below the consensus estimate of -$0.01. Despite exceeding revenue forecasts with a reported $820.7 million against an expected $798.44 million, the stock price declined.
The company's net sales for the quarter decreased by 3.9% compared to the same period last year, primarily due to unfavorable volume/mix changes and the restart of one of its broth facilities.
The decline in net sales was attributed to planned distribution exits, particularly in the coffee and in-store bakery categories, and modestly unfavorable pricing adjustments. These factors were partially offset by the acquisition of the Coffee Roasting Capability.
Gross profit as a percentage of net sales also saw a decline, dropping by 4.4 percentage points YoY, mainly due to the broth facility restart, increased labor investment costs, and an unfavorable category mix. Adjusted EBITDA from continuing operations was $46.0 million, within the company's guidance range but significantly lower than the $91.3 million reported in the first quarter of the previous year.
TreeHouse also reaffirmed its full-year 2024 guidance, expecting net sales to range between $3.43 to $3.50 billion and adjusted EBITDA from continuing operations to be between $360 to $390 million.
The company anticipates a slight volume and mix benefit from recent acquisitions to be offset by modest deflationary pricing.
Steve Oakland, Chairman, Chief Executive Officer, and President, commented on the results, "We're encouraged by our solid start to fiscal 2024, delivering net sales results above our expectations."
He added, "While the downtime at our broth facility impacted first quarter profitability, restart of that facility coupled with our meaningful supply chain savings initiatives position us well to expand margin through the rest of the year and deliver our full year profitability guidance."
Looking ahead, TreeHouse expects second-quarter net sales to range from $770 to $800 million, with a midpoint that suggests a roughly 2% decline.
Adjusted EBITDA for the second quarter is projected to be between $55 to $65 million. The company anticipates sequential improvements in adjusted EBITDA from the second to the third quarter and from the third to the fourth quarter, driven by new distribution wins, cost savings initiatives, improved service levels in the Broth business, and incremental pricing actions.
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