The Simply Good Foods Company ((SMPL)) has held its Q4 earnings call. Read on for the main highlights of the call.
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The Simply Good Foods Company’s recent earnings call presented a mixed sentiment, reflecting both strong growth and notable challenges. While the Quest and OWYN brands showed impressive performance and the company made strides in debt repayment and stock repurchase, these positives were tempered by the decline of the Atkins brand, product quality issues with OWYN, and pressures from cocoa costs and tariffs impacting margins.
Strong Performance of Quest Brand
Quest, a significant contributor to The Simply Good Foods Company’s portfolio, demonstrated robust growth. Representing nearly two-thirds of net sales in the fourth quarter, Quest achieved a year-over-year consumption growth of 11% and expanded household penetration to 19%. Over the fiscal year 2025, Quest’s consumption grew by 12%, with net sales increasing by 13% on a 52-week basis.
Successful Integration and Growth of OWYN
OWYN also exhibited strong performance, with consumption growth of 14% in the fourth quarter and 34% for the full year. The brand’s household penetration increased by 100 basis points, reaching 4.2%, highlighting its successful integration and growth within the company’s portfolio.
Debt Repayment and Stock Repurchase
The Simply Good Foods Company made significant financial strides by repaying $150 million of its term loan debt, totaling $240 million in repayments. Additionally, the company repurchased nearly 1.6 million shares, or about 2% of its outstanding common stock, investing approximately $51 million in this effort.
Expansion of Salty Snacks Capacity
In response to the growing demand for its Salty Snacks business, the company is expanding its production capacity. Construction on an additional production line is currently underway, indicating the company’s commitment to scaling this fast-growing segment.
Decline in Atkins Brand
The Atkins brand faced significant challenges, with a 12% decline in consumption for the fourth quarter and a 10% decline for the full year. This downturn was primarily due to losing distribution at club stores and not repeating certain high-volume, low ROI merchandising events.
Cocoa and Tariff-Related Margin Pressure
The company experienced a gross margin decline of 450 basis points in the fourth quarter, attributed to elevated input costs, particularly cocoa, and the impact of tariffs. These pressures are expected to persist into the first half of fiscal year 2026.
OWYN Product Quality Issues
OWYN encountered a product quality issue related to a raw material sourcing decision for P Protein, which affected the taste and texture of the product as it aged. This issue contributed to slower consumption growth for the brand.
Impairment Charge on Atkins Brand
A noncash loss on impairment of $60.9 million was recorded for the Atkins brand and related intangible assets, reflecting the brand’s underperformance in fiscal year 2025.
Forward-Looking Guidance
Looking ahead, The Simply Good Foods Company provided guidance for fiscal year 2026, anticipating net sales growth to range from -2% to 2%, and adjusted EBITDA to range from -4% to 1%. The company expects gross margins to decline by 100 to 150 basis points due to inflation and tariffs. The strategic focus will be on enhancing the Quest and OWYN brands, which represent about 75% of net sales, while addressing challenges with the Atkins brand by rightsizing its shelf space and focusing on a core assortment. The company also plans to invest in innovation, marketing, and capacity expansion to meet the growing demand for high-protein, low-sugar products.
In summary, The Simply Good Foods Company’s earnings call highlighted a blend of growth opportunities and challenges. The strong performance of the Quest and OWYN brands, along with strategic financial moves, were offset by the decline of the Atkins brand and margin pressures. The company’s forward-looking guidance reflects a cautious optimism, with a focus on strategic brand enhancements and addressing market challenges.