Mty Food Group ((TSE:MTY)) has held its Q3 earnings call. Read on for the main highlights of the call.
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MTY Food Group’s recent earnings call presented a mixed outlook, highlighting both achievements and challenges. The company reported a net gain in store locations and progress in digital and ERP initiatives, yet faced hurdles with same-store sales and the performance of Papa Murphy’s. Additionally, a decline in net income and increased operating expenses posed challenges, although growth in the Food Processing, Distribution, and Retail segment offered some positive momentum.
Net Gain in Store Locations
MTY Food Group achieved a net gain of 15 locations during the third quarter, supported by a robust pipeline of new locations and continued interest from franchise partners. This expansion reflects the company’s strategic focus on growth and its ability to attract franchisees, contributing to stable system sales.
Digital Sales Growth
Digital sales experienced a modest growth of 1% in Q3, now representing 19% of total sales. Excluding the impacts of Papa Murphy’s and foreign exchange, digital sales saw a 3% increase, indicating a positive trend in the company’s digital transformation efforts.
ERP Implementation Progress
Significant progress was made on the ERP implementation, with the Canadian go-live completed on time and on budget. The first phase of the U.S. rollout is underway, marking a critical step in enhancing operational efficiency and integration across the company’s operations.
Food Processing, Distribution, and Retail Segment Growth
The Food Processing, Distribution, and Retail segment saw a revenue growth of 19%, driven by a shift to a vendor-on-record model and successful promotional activities. This segment’s performance underscores MTY’s ability to adapt and thrive in a competitive market.
Same-Store Sales Challenges
Same-store sales in Canada remained flat, with a 2.5% decline in mall-based locations, while U.S. markets experienced continued volatility. These challenges highlight the need for strategic adjustments to boost sales performance in these areas.
Papa Murphy’s Performance Issues
Papa Murphy’s system sales declined, impacting overall digital sales growth. The company has undertaken strategic closures of underperforming locations to address these issues and improve the brand’s performance.
Net Income Decline
Net income attributable to owners dropped to $27.9 million from $34.9 million, primarily due to a $6.2 million net impairment charge on intangible costs. This decline reflects the financial pressures faced by the company amidst its expansion efforts.
Operating Expense Increases
Operating costs in Canada increased by $1.4 million, with higher costs noted in corporate stores, although U.S. operating expenses decreased by 4%. Managing these expenses remains a focus for MTY as it seeks to optimize its cost structure.
Forward-Looking Guidance
Looking ahead, MTY Food Group aims to drive efficiency, accelerate store development, and leverage its asset-light model to capture long-term growth opportunities. The company ended the quarter with net debt of approximately $602 million and a debt-to-EBITDA ratio of 2.3x, providing flexibility for potential acquisitions. MTY’s strategic focus on efficiency and growth positions it well for future success.
In summary, MTY Food Group’s earnings call reflected a balanced view of its current position, with notable achievements in store expansion and digital initiatives, alongside challenges in same-store sales and net income. The company’s forward-looking strategies aim to enhance efficiency and growth, providing a hopeful outlook for investors.