Simply Good Foods Q1 earnings jump on strong sales growth

The Simply Good Foods Company (SMPL) Thursday reported an increase in net profit for the first quarter of 2019 when a sharp growth in volume pushed up sales. Though the results missed analysts’ estimates, the company’s stock gained modestly following the announcement.

During the November quarter, net income rose to $15.26 million or $0.18 per share from $10.22 million or $0.14 per share in the same period of last year. While earnings were boosted by higher gross profit and lower income tax expense, an increase in supply chain costs restricted the pace of growth.

The bottom line benefitted from higher gross profit and lower income tax expense, partially offset by high supply chain costs

The company, a provider of nutritional foods and snacking products, reported net sales of $120.93 million for the first quarter, up 13.5% compared to last year. The topline benefitted from strong volume growth, which was partially offset by unfavorable non-price related trade promotion. Meanwhile, both earnings and sales fell short of expectations.

Joseph Scalzo, CEO of Simply Good Foods, said, “Our business continues to be driven by strong base velocity gains of our core products. As expected, retail takeaway growth exceeded net sales as we worked with our manufacturing network partners to secure additional supply to keep pace with robust demand.”

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The management expects that adjusted EBITDA and net sales will surpass its long-term financial target is fiscal 2019. Full-year net sales are currently expected to increase between 4% and 6% – which is slightly above the previous prediction – supported by continued volume growth in the first half, which is likely to be offset by supply issues in the latter part of the year.

After reaching a new peak in November, shares of Simply Good Foods declined progressively in the following weeks. The stock, which regained momentum in late December, gained about 1% Thursday after the earnings report.

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