Lancaster Colony: Reports Q4 And FY-2024 Results

Westerville / OH. (lc) Lancaster Colony Corporation reported results for the company’s fiscal fourth quarter and fiscal year ended June 30, 2024.

Fourth Quarter Summary

• Consolidated fourth quarter net sales declined 0.4 percent to USD 452.8 million. Retail segment net sales declined 0.8 percent in the quarter to USD 234.2 million, driven by the impact of our tactical decision to exit our perimeter-of-the-store bakery product lines this past March. Foodservice segment net sales were essentially flat at USD 218.6 million as deflationary pricing offset volume growth.
• Consolidated gross profit increased USD 4.4 million to USD 97.6 million.
• Consolidated operating income increased USD 30.2 million to USD 41.7 million. Restructuring and impairment charges reduced this year’s fourth quarter operating income by USD 2.7 million while impairment charges reduced last year’s fourth quarter operating income by USD 25.0 million.
• Fourth quarter net income was USD 1.26 per diluted share versus USD 0.33 per diluted share last year. Restructuring and impairment charges reduced this year’s fourth quarter net income by USD 0.08 per diluted share whereas impairment charges reduced last year’s fourth quarter net income by USD 0.70 per diluted share.

Chief Executive’s Commentary

CEO David A. Ciesinski: «We were pleased to report gross profit growth of 4.8 percent in the fourth quarter despite the modest sales decline. In the Retail segment, our licensed items continued to perform well, as the recently introduced sandwich and steak sauces provided incremental sales growth to our lineup of licensed sauces and dressings. Our category-leading Bakery frozen garlic bread also achieved solid volume gains in the quarter. Excluding the perimeter-of-the-store bakery product lines that we exited in March, Retail net sales increased 1.4 percent and Retail sales volume, measured in pounds shipped, increased 1.2 percent. In the Foodservice segment, flat net sales reflect the unfavorable impact of deflationary pricing while the segment’s sales volume improved 4.2 percent, driven by increased demand from several of our national chain restaurant account customers.

«The USD 4.4 million increase in fourth quarter gross profit resulted in a gross profit margin of 21.6 percent, an increase of 110 basis points versus the prior year driven by our cost savings programs. As anticipated, we did not benefit from pricing net of commodity costs, or PNOC, in our fiscal fourth quarter.»

Fourth Quarter Results

Consolidated net sales decreased 0.4 percent to USD 452.8 million. Retail segment net sales declined 0.8 percent to USD 234.2 million while the segment’s sales volume, measured in pounds shipped, was flat. Excluding the perimeter-of-the-store bakery product lines that we exited in March, Retail net sales increased 1.4 percent and Retail sales volume increased 1.2 percent. In the Foodservice segment, net sales were essentially unchanged at USD 218.6 million including the unfavorable impact of deflationary pricing while Foodservice sales volume increased 4.2 percent.

Consolidated gross profit increased USD 4.4 million to USD 97.6 million as our cost savings programs more than offset higher labor costs and the impact of deflationary pricing.

SG+A expenses decreased USD 3.5 million to USD 53.2 million as expenditures for Project Ascent, our ERP initiative, continued to wind down and consumer spending was also lower. These lower costs were partially offset by increased investments in personnel and IT. Expenditures for Project Ascent totaled USD 0.5 million in the current-year quarter versus USD 5.6 million last year.

Restructuring and impairment charges of USD 2.7 million are attributed to our decision to exit our perimeter-of-the-store bakery product lines this past March. The associated property and equipment for those product lines were sold or disposed of during the fourth quarter, and we do not anticipate any additional related charges going forward. In the prior-year quarter, impairment charges of USD 25.0 million resulted from a reduction in the carrying value of certain intangible assets attributed to the now discontinued Flatout product line.

Consolidated operating income increased USD 30.2 million to USD 41.7 million as impacted by the net reduction of USD 22.3 million in restructuring and impairment charges along with the improved gross profit and reduced SG+A expenses.

Net income increased USD 25.7 million to USD 34.8 million, or USD 1.26 per diluted share, versus USD 9.2 million, or USD 0.33 per diluted share, last year. In the current-year quarter, the restructuring and impairment charges reduced net income by USD 2.1 million, or USD 0.08 per diluted share, while expenditures for Project Ascent reduced net income by USD 0.4 million, or USD 0.01 per diluted share. In the prior-year quarter, impairment charges reduced net income by USD 19.3 million, or USD 0.70 per diluted share, while expenditures for Project Ascent reduced net income by USD 4.3 million, or USD 0.16 per diluted share.

Fiscal Year Results

For the fiscal year ended June 30, 2024, net sales increased 2.7 percent to USD 1.87 billion compared to USD 1.82 billion a year ago. Net income for the fiscal year totaled USD 158.6 million, or USD 5.76 per diluted share, versus the prior-year amount of USD 111.3 million, or USD 4.04 per diluted share. In fiscal 2024, restructuring and impairment charges reduced net income by USD 11.4 million, or USD 0.42 per diluted share, and expenditures for Project Ascent decreased net income by USD 6.3 million, or USD 0.23 per diluted share. In fiscal 2023, expenditures for Project Ascent decreased net income by USD 23.0 million, or USD 0.84 per diluted share, while restructuring and impairment charges reduced net income by USD 19.3 million, or USD 0.70 per diluted share.

Fiscal 2025 Outlook

Ciesinski. «Looking ahead to fiscal 2025, we anticipate Retail segment sales will continue to benefit from volume growth led by our licensing program, including increased sales from the new products, flavors and sizes we introduced in fiscal 2024. We are also excited to share that our partnership with Texas Roadhouse has expanded beyond steak sauces to include their popular dinner rolls, which we introduced with a regional pilot test in June. In addition, we anticipate continued positive sales momentum for our Bakery frozen garlic bread products in fiscal 2025 driven by the introduction of a great-tasting gluten-free garlic bread, along with volume growth for our refrigerated dressings. In the Foodservice segment, we expect sales volume to be led by growth from select quick-service restaurant customers in our mix of national chain restaurant accounts, while external factors, including U.S. economic performance and consumer behavior, may impact demand. With respect to our input costs, in aggregate we do not foresee significant impacts from commodity cost inflation or deflation in the coming year. We also expect to drive margin improvement through our cost savings programs.»