TreeHouse Foods manages an unpredictable second quarter.
The address is Oak Brook, Illinois. The second quarter of fiscal 2020 presented a number of difficulties for private label food and beverage maker TreeHouse Foods, Inc., chief among them being the coronavirus (COVID-19) that caused manufacturing facilities to start and stop. A little below the company’s projected results, the sporadic shutdowns reduced service rates.
“During a conference call with analysts on August 6, we made very conscious decisions in a number of instances to temporarily close certain locations so that we could take additional sanitation measures and keep our people safe,” stated President and CEO Steven T. Oakland. In several categories, there was underserved demand in the second quarter as a result.
The production disruption affected the following categories: creamers, pretzels, and dry dinners.
Because branded manufacturers could modify shelf sets with greater demand stock-keeping units (SKUs) more quickly than private label businesses, private label also lost market share throughout the quarter.
“Considering the range of formulations and packaging, this is a very complex exercise for private label,” Mr. Oakland stated. “Although customers had fewer options on the shelves as a result of this restricted assortment, it allows us to operate our operations more effectively and give merchants additional tenants.
Over 80% of the SKUs we limited have now been restored as demand has stabilised, and the majority of them will begin shipping by the end of August. We believe that our existing plant protocols allow us to improve our levels of client service moving ahead.
The corporation lost $1.5 million for the quarter that ended on June 30. This was less than the $172 million it lost during the same period last year.
Less than 2% more was sold, totaling $1.04 billion.
Comparing the Meal Preparation business segment of TreeHouse to the second quarter of fiscal 2019, sales increased by $10 million to $668 million. Sales were driven by favourable volume/mix as a result of higher retail demand brought on by the epidemic, the business said.
Sales for the Snacking & Beverage division increased by $6 million to $374 million over the prior year.
TreeHouse’s earnings per share guidance was increased by management to $2.55 to $2.75. Sales in fiscal 2020 are predicted to range from $4.1 billion to $4.2 billion.
Chief financial officer William J. Kelley stated, “We took into consideration the carryover loss business, new commercialization, corporate-related demand, and the negative impact of food away from home.” “This is still an evolving scenario. We are, however, increasing our forecasts for revenue in the second half, expecting it to be flat to up 2% on a reported basis and up 2% to 4% on an organic basis, based on what we observe today.
Recessions, according to Mr. Oakland, are good for private label, but TreeHouse hasn’t yet seen the effects of the most recent one.
He stated, “At this time, we think that the consumer hasn’t felt the pinch.” Given the extraordinary stimulus programme implemented by the government, we have not yet seen this recession has resulted in modifications to consumer behaviours, such as our grocery shopping patterns.
It’s difficult to predict anything other than a recessionary tailwind for private label, regardless of whether you choose to think of the recovery as a U, V, or W shape. I would contend that the effects of these tendencies will eventually become apparent.