Lancaster was Colony anticipates growth in the 2024 fiscal year.
WESTERVILLE, OH — Despite a dismal year-end performance, Lancaster Colony Corp. executives stated that the company is ready for growth in the upcoming year and that the factors affecting results at the end of fiscal 2023 have passed.
Positive momentum for the company’s New York Bakery frozen garlic bread and volume growth in foodservice driven by increased business with certain quick-service restaurant and national chain restaurant accounts are among the encouraging factors mentioned by CEO David A. Ciesinski.
Lancaster Colony’s net income for the fiscal year that ended on June 30, 2022, was $111.3 million, or $4.04 per share on the common stock, a 24% increase from $89.6 million, or $3.26 per share, for the previous fiscal year. Net sales increased by 9% to $1.82 billion from $1.68 billion in the previous year.
Special charges, primarily related to Project Ascent, the company’s enterprise resource planning initiative, along with restructuring and impairment charges, had a negative impact on the results in both years. The special items collectively decreased the net income for the fiscal years 2022 and 2023 by a net $54.3 million and $42.3 million, respectively. Net income increased by 8% in the fiscal year 2023 when these items were excluded.
According to Lancaster Colony, the company’s final quarter fiscal 2022 net sales of $25 million were made ahead of the July 1 ERP go-live date, which distorted the year-over-year sales comparison.
Mr. Ciesinski stated, “We experienced some transitory costs associated with our long-term strategic investments in production capacity and our ERP network, which is why the fourth quarter gross profit results fell short of our expectations.” “These problems have now been resolved, and we are excited about the numerous advantages these investments will bring to our company in the years to come.”
The fourth quarter’s net income was $9.2 million, or 33¢ per share, compared to $29 million, or $1.06, in the same period the previous year, a 68% decrease. Sales increased by 0.5% to $454.7 million. A $25 million charge that reduced the carrying value of the company’s Flatout, Inc. flatbread business was included in the fourth quarter results for the fiscal year 2023. The company incurred charges totaling $10.5 million in the previous year, the majority of which resulted from a decrease in Angelic Bakehouse’s carrying value.
The company claimed that expenses related to a retail product line that was discontinued, ERP implementation difficulties, and startup costs at a dressing and sauce plant in Horse Cave, Kentucky, had a negative impact on profits.
“We anticipate volume growth led by our licensing program, including incremental growth from the new products, flavors, and sizes we introduced in fiscal 2023,” Mr. Ciesinski stated, “looking ahead to fiscal 2024. We are also thrilled to announce that, starting in the spring, we will be expanding our licensing program to include Texas Roadhouse steak sauces. Furthermore, we anticipate that the positive momentum for our frozen garlic bread products from New York Bakery will continue.
While external factors like the US economy and potential shifts in consumer sentiment may have an impact on demand, we anticipate that growth from a select group of quick-service restaurant customers in our mix of national chain restaurant accounts will lead the way in foodservice sales volumes. The price measures implemented in fiscal 2023 will also continue to help consolidated net sales.
“We anticipate that in the upcoming year, the impact of inflationary costs will significantly lessen. Our cost-cutting efforts and the pricing strategies we’ve put in place will help to offset any remaining inflationary expenses. We successfully finished the last phase of the implementation phase for our ERP initiative, Project Ascent, and will now focus on utilizing the new system to improve our execution in the upcoming fiscal year, 2024.
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Speaking on a call with investment analysts on August 23, Mr. Ciesinski stated that retail sales volume increased 1.7% in the fourth quarter over the previous year, excluding advanced ordering prior to the ERP launch. During the fourth quarter, the company’s licensing program (which includes products like Buffalo Wild Wings, Olive Garden, and Chick-fil-A sauces and dressings) contributed significantly to the 4.7% increase in retail sales volume.
“Our category-leading Sister Schubert and New York Bakery brands saw significant share gains in the quarter, according to Circana data, formerly IRI. According to Mr. Ciesinski, Sister Schubert’s leading share of the frozen dinner roll category increased by 200 basis points to 56.1%, while New York Bakery’s leading share of the frozen garlic bread category increased by 180 basis points to 42.3%.