TreeHouse Foods announced President Robert Aiken resigned Oct. 29, 2017. Sam Reed, the company's chairman and CEO, will assume the role of president and the private label manufacturer will initiate a search for a new CEO. "We have strong leadership and a clear path forward, and we are committed to finding the right candidate to lead us on that journey," Reed said in a statement.
The company also lowered its 2017 adjusted earnings per fully diluted share estimate to a range of $2.70 to $2.80. During its second quarter earnings release in August, it lowered its full year guidance projection to between $3.15 to $3.30 per share.
During its latest earnings report, sales, profits and earnings per share were all down. Net sales slid 2.4% to $1.5 billion from $1.6 billion for the same period last year. Net income fell to $28.8 million, compared to $37.4 million for the year-ago period. Adjusted EBITDA was $148 million, a 12.7% decrease from the third quarter of 2016.
TreeHouse surprised investors with a barrage of news Thursday, and hardly any of it was good. The lone exception was that the company's board of directors had approved a $400 million share buyback program — representing about 10% of its outstanding shares — to start next week.
Still, the sudden departure of its president, and the announcement that TreeHouse is commencing a search for a new CEO, marks the latest shakeup in the c-suite of the private label food and beverage manufacturer. Aiken was just appointed president and chief operating officer in July, and now he's leaving a little more than three months later. The company did not provide a reason for his resignation. The challenges facing the company's leadership ranks come as TreeHouse has sharply cut guidance at least twice this year.
"We remain as committed as ever to long-term growth, business simplification, and our private label strategy," Reed said in a statement. "As retailers step up their efforts to build their private label presence, we continue to believe we are well positioned to provide the greatest combination of choice and value for our customers and their consumers. However, we have a great deal of work to do internally in order to improve our margin structure and cost to serve."
Food Dive called TreeHouse seeking comment on the executive changes, but officials could not be reached.
During its third-quarter announcement Thursday, the company posted declines in many of its key metrics, including sales, profits and earnings per share. TreeHouse said the decline in net sales was "more than explained" by the divestiture of its canned soup and infant feeding business completed in May, a move which was responsible for the year-over-year decline.
Sales were up in the company's baked goods, beverages, condiments and meals units, but higher operating costs, unfavorable pricing and competition from other brands exerted pressure.
"We are disappointed that third quarter results came in below our expectations," Reed said in a statement. "Aggregate sales were relatively flat excluding the soup divestiture and operations struggled as we faced further unanticipated volume pressure, increased manufacturing complexity, and retail bid pricing compression in several segments."
TreeHouse is facing challenges in both its business operations and the individuals who are leading it. With changes among its leadership, there is uncertainty as to not only who will eventually take over but whether they have the experience and knowledge to abate the underlying difficulties facing the business. It's not surprising that TreeHouse's share price plunged 30% to $46.53 today, its lowest level in more than five years. The company's stock is down about 50% from its 52-week high earlier this year.
The company noted that it remains on track for Phase 1 of its TreeHouse 2020 restructuring program, which consists of the closure of two manufacturing facilities and the downsizing of another. About 375 workers were to be laid off as a result of those changes. TreeHouse also plans to complete a company-wide assessment of customer relationships and its expenses across all areas to identify savings that can be achieved by the end of next year.
Nationwide, store brands contribute more than $150 billion in yearly sales for grocers, according to the Private Label Manufacturers Association. And shoppers save $30 billion every year by choosing store brands over mainstream brands. It's uncertain why TreeHouse is struggling, considering the growing demand for private label items among consumers.
TreeHouse has a full agenda for the next year if it hopes to get back on track to better sales and performance. If the recent turmoil is any indication, TreeHouse has a lot of work ahead of it.