Release Date: November 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Treehouse Foods Inc (THS, Financial) achieved an adjusted EBITDA of $103 million, which was at the midpoint of their guidance range, driven by strong adjusted gross profit and supply chain savings.
- The company is making significant progress on supply chain initiatives, with a commitment to deliver $250 million in gross supply chain savings through 2027.
- Private brand unit sales were positive in the quarter, and Treehouse Foods Inc (THS) remains well-positioned in the growing private brand grocery market.
- Treehouse Foods Inc (THS) is seeing growth in specific categories such as pretzels and in-store baked cookies, which are expected to continue driving momentum.
- The company is focused on profitability and cash flow, building a strong margin management function to enhance profitability by optimizing business mix and pricing architecture.
Negative Points
- Treehouse Foods Inc (THS) experienced a voluntary recall of frozen griddle products, impacting net sales and causing a temporary facility closure.
- The company's third quarter adjusted net sales of $854 million were below guidance, affected by weakening consumer trends and shipping delays due to Hurricane Helene.
- There is a significant deceleration in private brand unit sales as the quarter progressed, with continued pressure on consumer spending impacting the broader market.
- Treehouse Foods Inc (THS) revised its full-year adjusted net sales guidance to reflect a decline of 1% to 2% year over year, citing slowing consumption and the impact of the recall.
- The company faces challenges in maintaining consistent top-line growth due to macroeconomic headwinds and softer consumption trends in its categories.
Q & A Highlights
Q: Despite private label outperforming brands, Treehouse Foods has a weaker outlook for 2025. What has changed since last quarter?
A: Steven Oakland, CEO, explained that the mass channel, which was previously leading growth, turned negative in the third quarter. This trend continued into October, affecting private label sales. The company is now planning for flat growth, focusing on internal savings and cash flow, while acknowledging the broader industry trend of declining volumes.
Q: How does increased promotional activity by branded players affect Treehouse Foods?
A: Steven Oakland noted that historically, private label has done well even with smaller price gaps. Currently, price gaps are larger, and increased promotions could drive more traffic to the shelves, benefiting private label by maintaining share in a larger market.
Q: What is the progress on Treehouse Foods' $250 million cost savings target?
A: Patrick O'Donnell, CFO, reported positive progress, particularly in procurement cost savings. The company is also focusing on driving efficiencies in manufacturing and distribution networks. These initiatives are expected to continue delivering savings into 2025.
Q: How is Treehouse Foods managing the frozen griddle recall, and what is the confidence level in resuming production?
A: Steven Oakland expressed confidence in resuming production in the first quarter of 2025. The recall was a result of internal diligence, and the company is investing in food safety to address identified gaps. This commitment is expected to strengthen the business long-term.
Q: Is Treehouse Foods considering M&A given the current market conditions?
A: Steven Oakland stated that M&A will be considered based on a build versus buy decision. The company is focused on increasing capabilities in certain categories and will pursue acquisitions if they are more cost-effective than building internally. Maintaining balance sheet strength remains a priority.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
