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Simply Good Foods’ Q3 results beat estimates

The Simply Good Foods Company (NASDAQ: SMPL) topped analysts’ forecasts on revenue and earnings for the third quarter of 2019. Shares jumped over 6% during premarket hours on Tuesday.

Net sales increased 30.1% year-over-year to $139.5 million, driven by volume growth. The consensus estimate was for sales of $120 million.

Net income increased 88.7% to $13.5 million, or $0.16 per share, versus the year-ago quarter, helped by higher gross profit, partially offset by increases in operating expenses and income tax expenses. Analysts had forecasted EPS of $0.14.   

During the quarter, net sales growth outpaced retail takeaway driven by the timing of inventory changes versus the prior year at key retailers. The company saw an improvement in its supply situation and believes it is well-positioned to meet consumer demand.     

Joseph E. Scalzo, President and CEO, said, “We delivered double-digit sales growth in both the third quarter and year-to-date periods driven by our successful marketing strategy that positions Atkins as the brand of choice for consumers seeking nutritious and delicious snacking and meal replacement products for low carb lifestyles. US retail takeaway, as measured by IRI for the thirteen week period ended May 25, 2019, continued to be strong and was up 19.5% versus the prior year. Gross profit and adjusted EBITDA growth also increased double-digits in both the third quarter and year-to-date periods reflecting the strong sales growth as well as investments in marketing and capabilities that we believe will benefit the company in the near and long term.”

For the year-to-date period, net sales increased 18.9% while net income fell 29.5% compared to last year. Adjusted EBITDA rose 23.3%.

Simply Good Foods expects to end the year strong with net sales and adjusted EBITDA growth up meaningfully versus last year. The company anticipates full year fiscal 2019 net sales and adjusted EBITDA growth to be similar to the year-to-date percentage increases.

This outlook reflects solid volume growth and the benefit of a fifty-third week, as well as incremental strategic investments in marketing and the expectation that retail takeaway will sequentially slow given the more challenging year-ago growth rates.

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