Lancaster Colony Reports Second Quarter Sales and Earnings
- Record-breaking consolidated net sales and profit
- Consolidated gross profit and operating income increased significantly
- Retail and Foodservice segments both experienced sales growth
- Positive outlook for continued sales growth in both segments
- Deflationary pricing impacting Foodservice segment sales
- Higher labor costs and increased depreciation expense partially offset positive factors
- Increased SG&A expenses due to higher consumer spending and brokerage costs
Insights
The reported increase in consolidated net sales by 1.8% and gross profit by 19.0% for Lancaster Colony Corporation is indicative of a robust pricing strategy and effective cost management during a period marked by prior inflationary pressures. The notable improvement in gross profit margin to 25.0%, an increase of 360 basis points, suggests a strong operational leverage as the company benefits from favorable pricing net of commodity costs (PNOC) and cost-saving initiatives.
However, the retail segment's sales volume decline of 1.9% raises questions about underlying demand and efficiency of the company's value engineering initiatives. The Foodservice segment's growth, despite deflationary pricing, reflects resilience and potential for further expansion. Investors should monitor the company's ability to maintain these margins in the face of potential deflationary pressures and labor cost increases.
Understanding the context within the food industry, Lancaster Colony's performance is particularly noteworthy. The company's successful licensing program, especially with Chick-fil-A® sauces and dressings and strong performance of specific product lines like New York BRAND® Bakery frozen garlic bread, indicate a strategic alignment with consumer preferences and successful product differentiation.
The growth in Foodservice sales volume by 4.6% highlights the company's competitive positioning in the market, capitalizing on the demand from national chain restaurant accounts. This growth trajectory, if sustained, could signify a strong foothold in the foodservice industry, which is often marked by fierce competition and fluctuating client demands.
The reported results from Lancaster Colony Corporation reflect broader economic trends, where businesses that navigated the inflationary environment effectively are now experiencing improved margins due to pricing power and cost reduction measures. The company's projection of continued favorability in pricing net of commodity costs, albeit at a lower level, suggests cautious optimism in the face of an uncertain economic outlook.
The mention of deflationary pricing as a headwind, however, is a significant economic indicator that could signal a shift in the pricing environment within the industry. This could have implications for the company's pricing strategies and profit margins moving forward. Stakeholders should be aware of the potential impact of broader economic shifts on the company's future performance.
Summary
-
Consolidated net sales increased
1.8% to a second quarter record versus$485.9 million last year. Retail net sales grew$477.4 million 2.0% to while Foodservice net sales advanced$264.0 million 1.5% to .$221.9 million -
Consolidated gross profit increased
, or$19.4 million 19.0% , to a second quarter record .$121.5 million -
Consolidated operating income increased
, or$14.4 million 28.1% , to a second quarter record .$65.8 million -
Net income was
per diluted share versus$1.87 per diluted share last year.$1.45
CEO David A. Ciesinski commented, “We were very pleased to complete the quarter with record sales and profit. In addition to carryover pricing, Retail segment net sales growth of
“Our reported gross profit margin improved to
“Looking ahead to our fiscal third quarter, we project Retail sales will continue to benefit from our expanding licensing program while, in the Foodservice segment, we expect sustained volume growth from select quick-service restaurant customers. We anticipate continued favorability in our pricing net of commodity costs, but at a sequentially lower level compared to our fiscal second quarter. Deflationary pricing is expected to remain a headwind to Foodservice segment net sales.”
Second Quarter Results
Consolidated net sales increased
Consolidated gross profit increased
SG&A expenses rose
Consolidated operating income grew
Net income increased
Fiscal Year-to-Date Results
For the six months ended December 31, 2023, net sales increased
Conference Call on the Web
The company’s second quarter conference call is scheduled for this morning, February 1, at 10:00 a.m. ET. Access to a live webcast of the call is available through a link on the company’s Internet home page at www.lancastercolony.com. A replay of the webcast will also be made available on the company’s website.
About the Company
Lancaster Colony Corporation is a manufacturer and marketer of specialty food products for the retail and foodservice channels.
Forward-Looking Statements
We desire to take advantage of the “safe harbor” provisions of the Private Securities Litigation Reform Act of 1995 (the “PSLRA”). This news release contains various “forward-looking statements” within the meaning of the PSLRA and other applicable securities laws. Such statements can be identified by the use of the forward-looking words “anticipate,” “estimate,” “project,” “believe,” “intend,” “plan,” “expect,” “hope” or similar words. These statements discuss future expectations; contain projections regarding future developments, operations or financial conditions; or state other forward-looking information. Such statements are based upon assumptions and assessments made by us in light of our experience and perception of historical trends, current conditions, expected future developments; and other factors we believe to be appropriate. These forward-looking statements involve various important risks, uncertainties and other factors, many of which are beyond our control, which could cause our actual results to differ materially from those expressed in the forward-looking statements. Some of the key factors that could cause actual results to differ materially from those expressed in the forward-looking statements include:
- efficiencies in plant operations and our overall supply chain network;
- the reaction of customers or consumers to pricing actions we take to offset inflationary costs;
- price and product competition;
- the impact of customer store brands on our branded retail volumes;
- adequate supply of labor for our manufacturing facilities;
- adverse changes in freight, energy or other costs of producing, distributing or transporting our products;
- inflationary pressures resulting in higher input costs;
- fluctuations in the cost and availability of ingredients and packaging;
- dependence on contract manufacturers, distributors and freight transporters, including their operational capacity and financial strength in continuing to support our business;
- stability of labor relations;
- dependence on key personnel and changes in key personnel;
- cyber-security incidents, information technology disruptions, and data breaches;
- capacity constraints that may affect our ability to meet demand or may increase our costs;
-
geopolitical events, such as Russia’s invasion of
Ukraine , that could create unforeseen business disruptions and impact the cost or availability of raw materials and energy; - the potential for loss of larger programs or key customer relationships;
- failure to maintain or renew license agreements;
- significant shifts in consumer demand and disruptions to our employees, communities, customers, supply chains, production planning, operations, and production processes resulting from the impacts of epidemics, pandemics or similar widespread public health concerns and disease outbreaks;
- changes in demand for our products, which may result from changes in consumer behavior or loss of brand reputation or customer goodwill;
- the possible occurrence of product recalls or other defective or mislabeled product costs;
- the success and cost of new product development efforts;
- the lack of market acceptance of new products;
- the extent to which business acquisitions are completed and acceptably integrated;
- the ability to successfully grow acquired businesses;
- the effect of consolidation of customers within key market channels;
- maintenance of competitive position with respect to other manufacturers;
- the outcome of any litigation or arbitration;
- changes in estimates in critical accounting judgments;
- the impact of any regulatory matters affecting our food business, including any required labeling changes and their impact on consumer demand;
- the impact of fluctuations in our pension plan asset values on funding levels, contributions required and benefit costs; and
- risks related to other factors described under “Risk Factors” in other reports and statements filed by us with the Securities and Exchange Commission, including without limitation our Annual Report on Form 10-K and Quarterly Reports on Form 10-Q (available at www.sec.gov).
Forward-looking statements speak only as of the date they are made, and we undertake no obligation to update such forward-looking statements, except as required by law. Management believes these forward-looking statements to be reasonable; however, you should not place undue reliance on statements that are based on current expectations.
LANCASTER COLONY CORPORATION |
||||||||||||
CONDENSED CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
||||||||||||
(In thousands except per-share amounts) |
||||||||||||
Three Months Ended |
|
Six Months Ended |
||||||||||
|
December 31, |
|
December 31, |
|||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||
Net sales |
$ |
485,916 |
|
$ |
477,394 |
|
$ |
947,488 |
|
$ |
902,931 |
|
Cost of sales |
|
364,448 |
|
|
375,292 |
|
|
717,298 |
|
|
701,774 |
|
Gross profit |
|
121,468 |
|
|
102,102 |
|
|
230,190 |
|
|
201,157 |
|
Selling, general & administrative expenses |
|
55,714 |
|
|
50,775 |
|
|
107,661 |
|
|
100,532 |
|
Operating income |
|
65,754 |
|
|
51,327 |
|
|
122,529 |
|
|
100,625 |
|
Other, net |
|
1,425 |
|
|
478 |
|
|
2,282 |
|
|
208 |
|
Income before income taxes |
|
67,179 |
|
|
51,805 |
|
|
124,811 |
|
|
100,833 |
|
Taxes based on income |
|
15,695 |
|
|
11,832 |
|
|
29,376 |
|
|
23,268 |
|
Net income |
$ |
51,484 |
|
$ |
39,973 |
|
$ |
95,435 |
|
$ |
77,565 |
|
|
|
|
|
|
|
|
|
|||||
Net income per common share: (a) |
|
|
|
|
|
|
|
|||||
Basic |
$ |
1.87 |
|
$ |
1.45 |
|
$ |
3.47 |
|
$ |
2.82 |
|
Diluted |
$ |
1.87 |
|
$ |
1.45 |
|
$ |
3.47 |
|
$ |
2.81 |
|
|
|
|
|
|
|
|
|
|||||
Cash dividends per common share |
$ |
0.90 |
|
$ |
0.85 |
|
$ |
1.75 |
|
$ |
1.65 |
|
|
|
|
|
|
|
|
|
|||||
Weighted average common shares outstanding: |
|
|
|
|
|
|
|
|||||
Basic |
|
27,425 |
|
|
27,471 |
|
|
27,437 |
|
|
27,460 |
|
Diluted |
|
27,440 |
|
|
27,493 |
|
|
27,457 |
|
|
27,476 |
|
(a) Based on the weighted average number of shares outstanding during each period. |
LANCASTER COLONY CORPORATION |
||||||||||||||||
BUSINESS SEGMENT INFORMATION (Unaudited) |
||||||||||||||||
(In thousands) |
||||||||||||||||
|
Three Months Ended |
|
Six Months Ended |
|||||||||||||
December 31, |
December 31, |
|||||||||||||||
|
2023 |
|
2022 |
|
2023 |
|
2022 |
|||||||||
NET SALES |
|
|
|
|
|
|
|
|||||||||
Retail |
$ |
263,992 |
|
|
$ |
258,763 |
|
|
$ |
506,176 |
|
|
$ |
481,979 |
|
|
Foodservice |
|
221,924 |
|
|
|
218,631 |
|
|
|
441,312 |
|
|
|
420,952 |
|
|
Total Net Sales |
$ |
485,916 |
|
|
$ |
477,394 |
|
|
$ |
947,488 |
|
|
$ |
902,931 |
|
|
|
|
|
|
|
|
|
|
|||||||||
OPERATING INCOME |
|
|
|
|
|
|
|
|||||||||
Retail |
$ |
59,521 |
|
|
$ |
49,352 |
|
|
$ |
112,645 |
|
|
$ |
92,252 |
|
|
Foodservice |
|
27,145 |
|
|
|
26,696 |
|
|
|
53,778 |
|
|
|
58,625 |
|
|
Corporate Expenses |
|
(20,912 |
) |
|
|
(24,721 |
) |
|
|
(43,894 |
) |
|
|
(50,252 |
) |
|
Total Operating Income |
$ |
65,754 |
|
|
$ |
51,327 |
|
|
$ |
122,529 |
|
|
$ |
100,625 |
|
LANCASTER COLONY CORPORATION |
||||||
CONDENSED CONSOLIDATED BALANCE SHEETS (Unaudited) |
||||||
(In thousands) |
||||||
|
December 31, |
June 30, |
||||
2023 |
2023 |
|||||
ASSETS |
|
|
||||
Current assets: |
|
|
||||
Cash and equivalents |
$ |
133,848 |
$ |
88,473 |
||
Receivables |
|
100,188 |
|
114,967 |
||
Inventories |
|
158,192 |
|
158,265 |
||
Other current assets |
|
13,171 |
|
12,758 |
||
Total current assets |
|
405,399 |
|
374,463 |
||
Net property, plant and equipment |
|
490,391 |
|
482,206 |
||
Other assets |
|
253,135 |
|
256,325 |
||
Total assets |
$ |
1,148,925 |
$ |
1,112,994 |
||
LIABILITIES AND SHAREHOLDERS’ EQUITY |
|
|||||
Current liabilities: |
|
|||||
Accounts payable |
$ |
104,114 |
|
$ |
111,758 |
|
Accrued liabilities |
|
59,262 |
|
|
56,994 |
|
Total current liabilities |
|
163,376 |
|
|
168,752 |
|
Noncurrent liabilities and deferred income taxes |
|
77,223 |
|
|
81,975 |
|
Shareholders’ equity |
|
908,326 |
|
|
862,267 |
|
Total liabilities and shareholders’ equity |
$ |
1,148,925 |
|
$ |
1,112,994 |
View source version on businesswire.com: https://www.businesswire.com/news/home/20240131029981/en/
Dale N. Ganobsik
Vice President, Corporate Finance and Investor Relations
Lancaster Colony Corporation
Phone: 614/224-7141
Email: ir@lancastercolony.com
Source: Lancaster Colony Corporation
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