B&G Foods reported fourth-quarter net sales of $473.7 million, which was a 14.5% jump from the same period in 2016, according to a company release. The sales figure missed Wall Street projections by about $8.5 million. Net income was up to $129.9 million, compared to $13.5 million in the fourth quarter a year ago, most of which was due to a one-time tax benefit from the corporate tax cut enacted in December.
Net sales for fiscal 2017 were up about 20% to $1.67 billion from $1.39 billion in 2016. B&G's spices and seasonings business and its Victoria pasta sauces — both acquired during in the fourth quarter of 2016 — generated sales above projections, the company said.
B&G said it remains on the lookout for more companies and brands it can acquire. "I think acquisitions are extremely important," Robert Cantwell, president and CEO of B&G Foods, said on a Tuesday earnings call. "It's part of our model, and acquisitions that deliver products that today's consumer wants. And I think that's what we've done in our last number of acquisitions."
B&G has made a name for itself by expanding the company through acquisitions and boosting the prominence of once-loved brands that have fallen out of favor — such as Cream of Wheat and Green Giant — and by introducing new products. Its brands can now be found in baking, condiments, soups, sauces, syrups and frozen foods. As a result, B&G has doubled in size in just three years.
While frozen foods have struggled recently, there are signs they are making a comeback, with B&G's Green Giant a prime beneficiary. A study from the University of Georgia, in partnership with the Frozen Food Foundation, showed frozen veggies are as healthy — if not more so — as fresh-stored ones. B&G said net sales of Green Giant frozen products in 2017 increased $18.7 million, or 23.4%, benefiting from the strong performance of new innovation products.
Less-positive results were reported in the company's Green Giant shelf-stable segment, where sales dropped by $30.6 million, or 19.6%, because of weak consumption trends and distribution losses. Maple syrup sales dropped 7% after B&G decided last year to quit selling certain private labels. Sales of Ortega taco sauce and Mexican products fell 2.1% due to ongoing competition. Overall, base business net sales for fiscal 2017 were down 1.1% to about $15 million, mainly due to decreased unit volume and net pricing, the company said.
"We are addressing the modest cost headwinds that we are facing, including increased freight and transportation costs, with price increases that we are implementing across our portfolio, and with cost cutting initiatives," Cantwell said. "We expect to deliver strong net cash from operations and free cash flow in 2018."
In a note, Barclays said while B&G's 6% dividend yield could offer support for the shares, the company doesn't "yet have the fundamental catalyst to make us more constructive on the shares at this stage."
"To be sure, some businesses, including Green Giant frozen, Pirate's Booty, and spices/seasonings are growing nicely. But, we simply wonder whether overall legacy volume growth is a prudent assumption for 2018, given many center store packaged food companies are now looking to just get their respective core units back to flat through innovation and new product launches," Barclays said.
Cantwell said on the earnings call that while B&G would continue to look at other acquisitions that come up in better-for-you and snacking categories popular with consumers, it was most interested in purchasing well-established brands like Pirate's Booty, the line of baked snacks the company bought in 2013.
"When we bought Pirate's Booty, we bought a brand that was around from I think the late '70s, or whenever it kind of kicked in, or early '80s. But it was a brand that had real legs on the upside, but it was a brand that was very stable for the long-term," he said. "So certainly, those kind of brands are what we're going to look at. But truly the real answer is we can buy another frozen brand, we can buy shelf-stable, we can buy snacks, but we want to be in categories where consumers are shopping more today, is really the goal."
For fiscal 2018, B&G projected net sales of between $1.72 and $1.75 billion, which includes some accounting system changes that will reduce that total by about $20 million. Those figures compare to 2017 full-year net sales guidance of between $1.55 and $1.68 billion, and which ended up coming in at $1.67 billion, according to this latest earnings report.
B&G seems to be charting a disciplined course and emphasizing its strongest product lines by putting marketing muscle behind them, bolstering the faltering ones and keeping an eye out for potential acquisitions that make sense and bring value to the company within a reasonable amount of time. That's no small feat in a strongly competitive marketplace that continues to challenge most CPG companies. The risk for B&G is that with so many brands — and an interest in acquiring more — the company has too many products to oversee in its portfolio, causing it to lose its focus.