WESTERVILLE, OHIO — While most of the company’s growth in the first quarter came from pricing actions, executives at Lancaster Colony Corp. indicated that changes in product mix also boosted performance.
Both of Lancaster’s businesses — retail and hospitality — have streamlined inventory management, Thomas Pigott, chief financial officer, said during a conference call with analysts Nov. 3 to discuss first-quarter results.
“Both segments have eliminated lower profit businesses and SKUs (stock keeping units),” said Mr. Pigott. “Storage days available have decreased compared to the same quarter last year and our inventory mix is more in line with demand trends. These factors, along with a more stable and predictable operating environment, helped improve gross profit and our cash flow performance.”
Within the retail segment, IRI data for the quarter showed stock gains for Sister Schubert’s Dinner Rolls, said David Ciesinski, president and chief executive officer.
“Sister Schubert’s share in the frozen rolls category increased 290 basis points to 53.9%,” he said.
In fiscal 2022, 36% of Lancaster’s retail sales were made up of frozen bread products.
For the first quarter ended September 30, Lancaster’s net income totaled $37.5 million, equivalent to $1.36 per common share, up 23% from $30.7 million. dollars, or $1.11 per share for the same period last year. Net sales were $425 million, up 8.4% from $392 million a year earlier.
“While our commodity inflation was about 25% this quarter, our pricing actions offset most of that increase from last year’s shortfall, resulting in improved performance,” said Mr. Pigott.
Retail store operating income was $42.9 million for the first quarter, down 11% from $48.2 million in the year-ago quarter. Net retail sales were essentially flat at $223 million. Revenue compared to a 15.6% increase in the prior-year quarter also reflected the impact of pre-ordering in the fourth quarter of 2022.
Consolidated net sales were unfavorably impacted by an estimated $25 million attributable to fourth-quarter pre-orders ahead of the company’s ERP go-live on July 1, Lancaster said. Of this amount, approximately $11 million was in retail presales and the remaining $14 million was in foodservice presales.
In addition to sister Schubert’s brand gains, Lancaster said IRI data showed stock gains for Marzetti chilled dressings in the first quarter. Marzetti brand dressings in the chilled dressings category rose 190 basis points to 23.8%. Marzetti’s chilled caramel dips were also among the top-performing product lines in the first quarter.
“Volume sold in terms of pounds shipped decreased by 15%, impacted by three main factors: first, our decision to discontinue some less profitable product lines in fiscal 2022; second, the extended order before the go-live of our ERP; and third, elasticity of demand, which is due to inflationary prices,” Ciesinski said.
Foodservice segment operating income totaled $31.9 million for the quarter, compared to $15.8 million for the first quarter of fiscal 2022. Quarterly net sales at the unit increased 20% from 168.2 million US dollars to 202.3 million US dollars. Revenue growth in the foodservice segment was driven by inflationary pricing and volume growth among select quick-service customers among its national restaurant chains, the company said.
“If you go back in time, if you go back a few years, foodservice made $30 million at a level similar to this one,” said Thomas Pigott, chief financial officer. “I think if we go back to 2020 it was around $27 million in operating income.”
Innovations for the quarter included Sister Schubert’s Filled Bites, a line of frozen delicious baked snacks. The company also introduced a new larger size of Chick-fil-A Sauce, launching Arby’s Sauce and Arby’s Horsey Sauce.