Dive Brief:
- TreeHouse Foods reported revenue of $1.48 billion for the first fiscal quarter of 2018, compared to $1.54 billion in the year-ago period, beating Wall Street estimates of $1.44 billion, according to a company release. The private label manufacturer reported a net loss of $34.1 million for the period, compared to net income of $28.2 million for the same time frame last year. The company said this was due to higher commodity, operating and freight costs.
- The company's baked goods segment was a bright spot this quarter — with net sales jumping to $346 million from $34.1 million in the same period in 2017 — boosted by favorable pricing and increased distribution in the cracker and cookie categories. But a labor dispute at a beverage plant and strong competition dragged sales in that segment to $249 million, compared to $268 million in the year-ago period.
- The company reaffirmed its adjusted fiscal guidance, including sales expectations of about $5.9 billion to $6.1 billion, and 2018 earnings per fully diluted share between $2 and $2.40. "Our work to address near-term challenges such as margin recovery is ongoing," Steve Oakland, president and CEO of Treehouse Foods said in the report. "More broadly, we are working to better position ourselves to address the evolving retail landscape. As a private label industry leader, we are in the ideal position within food and beverage as private label continues to grow at the expense of brands."
Dive Insight:
It's been a tumultuous time for TreeHouse, and the private label company is still headed into what former CEO and current non-executive chairman Sam Reed dubbed "a transition year." In 2017, the manufacturer was rattled by the abrupt departure of former Chairman Robert Aiken, who left just three months after he joined the company, and had to lower its guidance twice.
This year, there was more executive turnover. J.M. Smucker veteran Steve Oakland became CEO in March, inheriting the company's weak sales and struggle to improve private-label customer engagement.
The company is also working to trim personnel and operating costs. In February, TreeHouse announced that it plans to close a California pretzel and cereal snack mix plant by the end of the first quarter 2019, a move that will impact 249 employees and cost the company an estimated $21 million. The company is also shuttering a ready-to-eat cereal plant with 84 employees in Battle Creek, Michigan. It's clear from these tactics that TreeHouse is willing to make serious changes to get back on track, but shutting down facilities and cutting jobs isn't a sustainable path to growth, and could spook both customers and investors if the trend continues.
Despite the rocky past few months, Oakland maintained optimism about the coming year.
"In today's market, private label is highly relevant and is one of the keys to helping our customers differentiate themselves and build consumer loyalty," he said in the report. "As we improve our processes and put greater discipline in place, not only will we drive costs out, but we will better align our capabilities with our customers' needs."
It's unclear why TreeHouse is having such trouble when consumer demand for private-label products, especially in the better-for-you category, is surging. Only its baked goods, snacks and condiments segments saw sales increases during the first quarter. What internal problems are contributing to the company's weak performance?
The company has blamed external forces such as high commodity and freight costs for underperforming sales, as well as its divestiture of its soups and infant foods segment, which it agreed to sell to Riverbed Foods in April. Oakland's experience with retail sales and marketing services at Smucker could help the company better respond to changing climates and consumer trends, but he has a long road ahead of him.