Dive Brief:
- AdvancePierre Foods reported a decline in third quarter net sales to $393.7 million from $407.2 million in the same period last year, according to the company's earnings report Wednesday. However, the company saw a 0.7% uptick in volume in its core segments.
- Gross profit for the quarter increased to $105.4 million, or 26.8% of net sales, compared to Q3 2015's gross profit total of $87.7 million, or 21.5% of net sales. The company attributed the increase to "positive price realization net of raw material cost movements, productivity improvements, and contributions from volume," according to the earnings news release.
- AdvancePierre's board also announced a CEO succession plan, which includes appointing Christopher A. Silva as president and a company board member effective Nov. 14. Silva will later take over the role of CEO from John Simons, who will retire and step down on March 31.
Dive Insight:
AdvancePierre, whose portfolio centers around convenience-based foods like sandwiches, sandwich components, entrees and snacks, attributed the sales decline this past quarter in part to its elimination of lower margin business in its industrial segment. The company also pointed to "strategic price and trade spending investments to reflect lower raw material costs," according to the earnings news release.
But not all of the company's segments posted a sales downturn. AdvancePierre's convenience segment saw its net sales increase 11.7%, driven primarily by a 12.6% volume boost. New product debuts and increased distribution to convenience stores were key factors behind that volume jump.
These results demonstrate consumers' continued interest in RTE and convenience-centric food products across multiple retail channels. Earlier this year, the U.S. Department of Agriculture released a report that said American consumers spend half of their food budgets on convenience items due to more time-constrained and on-the-go lifestyles.
Volume growth was notably higher for AdvancePierre's core segments in the second quarter (3.2%) compared to the third (0.7%). But last month, the company completed its acquisition of Allied Specialty Foods, a manufacturer of raw and cooked beef and chicken Philly steak products. The deal shows the company's interest in both acquisitive growth and the further development of its own core portfolio.
AdvancePierre, which just launched its IPO in July, is still a relative newcomer as a publicly traded food company. But Credit Suisse has already expressed confidence in AdvancePierre as "a competitively advantaged company in an attractive category with several avenues for expansion," analyst Robert Moskow wrote in an August report.