Categories Analysis, Consumer

After beating pandemic, Simply Good Foods (SMPL) is set for long-term growth

The company is aggressively expanding the Atkins and Quest brands, with many product launches lined up

The Simply Good Foods Company (NASDAQ: SMPL), a leading provider of branded nutritional foods and snacking products, has survived the turbulence from the pandemic through measures like price hikes and promotional activities, which helped offset the negative impact of supply chain issues.

Simply Good Foods’ stock hit a record high last month, which is up 20% from its long-term average. Though SMPL pared most of its recent gains since then, the stock is expected to bounce back in the coming months, with market watchers predicting an 11% growth. Meanwhile, the recent pullback can be considered as an opportunity to own this relatively cheap stock.

Read management/analysts’ comments on quarterly reports

The company ended fiscal 2021 on a bright note, with fourth-quarter results benefiting from contributions from Quest Nutrition, which was acquired last year. Earnings topped expectations in every quarter last year. The recovery of consumer mobility amid market reopening, compared to last year, and increased brand reach acted as catalysts.

Pricing Power

Margins have benefitted from the upward revision of prices early this year, offsetting the impact of higher costs and supply chain challenges. Currently, the company is aggressively expanding the Atkins and Quest businesses — its top nutritional foods and snacks brands — with many product rollouts lined up. The management is also planning extensive marketing and advertising program for the current fiscal year.

In the fourth quarter of 2021, net sales increased 17% annually to $260 million, which is above analysts’ forecast. The company turned to a net profit of $0.19 per share in the three-month period from a loss of $0.41 per share a year earlier. At $48.5 million, adjusted EBITDA was up 30.9%. The management expects the uptrend would continue in the coming months and predicts accelerated revenue and earnings growth for fiscal 2022.

Cost Woes

Meanwhile, investments in growth initiatives and marketing spending would put pressure on liquidity. Also, supply chain cost inflation will continue to be a major concern in the near future.

“In this fiscal year, we anticipate that marketing will increase in line with sales growth. And new Atkins Rob Lowe advertising campaign is beginning to air now. We’ll be advertising across all forms with messaging focused on bars are back and taking a healthier approach to life. And I’m very excited to announce in the fiscal year, Quest in addition to their digital marketing efforts will be on air with television advertising for the first time in the brand’s history,” said Simply Food’s CEO Joseph Scalzo during his post-earnings interaction with analysts.

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Shares of the company traded lower during Thursday’s premarket session, after closing the previous session lower. The stock has gained 47% this year, with most of the gains coming after the October earnings report.

Looking for more insights on the earnings results? Click here to access the full transcripts of the latest earnings conference calls!

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