Q2 2020 Hostess Brands Inc Earnings Call
Greetings and welcome to hostess bread second quarter 2020 earnings conference call.
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Now, let's turn the conference over to Katie Turner. Please go ahead.
Good afternoon, and welcome to hold just second quarter 2020, <unk> earnings Conference call joining me on the call today.
Well said friends, president and CEO and buying for south.
Financial officer by now everyone should have access to the earnings release for the period ended June Thirtyth 2020, I went out this effort.
Four or five PM Eastern time, the press release, an updated investor presentation are available on focus is website at www Dot Hills is grants dot com, causing webcast a replay will be available on the website.
As much money that today.
But a number of forward looking statements have you refer to hosted the earnings release as well the company's Rodriguez.
You'll see a discussion of the fact is at the caused the company's actual results could differ materially.
Forward looking statements. Please remember the company undertakes no obligation to update or revise these forward looking statements. The company will make a number of references to non-GAAP financial measure.
Nobody believes these measures provide investors with useful perspective, any underlying growth trends of the business and hasn't goodness earnings release, a full reconciliation of non-GAAP financial measures to comparable GAAP measures.
I like to turn the call over here to tell him.
Yes.
I do Katie good afternoon, we appreciate you joining us today.
Before I get into our strong second quarter 2020 results.
To briefly comment on the ongoing.
He global health crisis.
As I did on last quarter's call I would like the diagnosis here I was hoping.
Brands Board of directors and leadership team.
I am grateful to everyone was remarkable dedication and commitment to serving on the frontline everyday at our facility in transportation grocery stores health care and beyond ensuring that the local communities are supportive.
I would like to reiterate our workforce recovery all those impacted EIRIS health.
Health and wellbeing and higher paying their families and communities we serve remains our top priority.
We are pleased to report that manufacturing and distribution facilities have continued to be operational serving our customers, bringing consumers copper enjoy your post as well.
In uncertain time.
In addition, our cold in 19 task force remain intact.
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Okay, that's all the opportunities and challenge we face.
Position hoses or six that's now and well into the future.
During this boat girl time, we continue to actively monitor and develop action plans to ensure we are really adapting to the garden bar.
Well when appropriate we bought a final manufacturing supply chain and merchandising priorities to respond to the changing market dynamics.
Which I will note.
Although not formally across key areas.
So what do you reported Q1 earnings.
Our team has done a great job in the face of Oh consumer demand as we support our retail partners to minimize out of stocks well also adjusting the time in the nature of trade.
We continue to update our marketing programs, that's target, it's a pay to changes in consumer demand.
Today and into the future our team remains grounded in our five pillars.
What was the core.
Growth through innovation, three proof through agility and efficiency or coping talent capabilities.
Leverage our strong cash flow.
I am pleased with our team's ability to drive another quarter of growth progress as we continue to operate in a marketplace impacted by Toby.
During the second quarter, we continue to execute on our stated objectives. These include executing on continued growth of course.
Completing significant integration activities for the recently acquired orphan business and implementing operational improvements.
Executional excellence demonstrating against these priorities I did they lost to exceed our financial expectations for the second quarter.
Since our sport.
I'm here.
Asian stress, we will continue to fuel our sustainable profitable growth.
The accomplishing complements and the second quarter included.
Net revenue growth of 11.7%.
Excluding the in store bakery, where I've been business sold in August 2019.
Adjusted net revenue growth of 14.7%.
Jordan acquisition contributed $30.4 million to this growth.
I had a plant.
Strong growth of our core hostess branded revenue was partially offset by lower private label and other non hostess branded revenue.
As we expected we were impacted by the mix shift from single serve multi pack seals, resulting from changing consumer shopping habits due to cope with 19.
However, we did see this improved over the course of the second quarter and into July.
Well, we have sales increased 7.4% and market share was 19.3% down seven basis points.
Oh says branded point of sale was up 9.2% representing continued growth ahead of this we baked goods category demonstrating the strong consumer demands with a well known and trusted hostess bread. During this time.
Our strong core hostess branded volume was partially offset by declines in non tracked channels, such as spending which is primarily our lower margin value.
Routing Clover Hill.
Taxes, Dolly Madison and private label sales due to shifts in demand from Cobiz 19.
Declining Dod tracked channels as well as ships and timing of July merchandising shipments year over year hope its way into Q2 Delta between our point of sales growth, it's we baked goods that revenue.
During the second quarter, we were able to achieving year over year point of sales growth within the convenience channel. Despite the unprecedented challenges it's channel is facing.
We also maintained our number one market share and achieved the highest share position in the history opposes within this important sales channel.
It's really speaks to the strength of our warehouse distribution model, where we were able to benefit from are believed to get our products into the stores.
Based on our recent market data it convenience channel trends are showing continued improvement in July.
While our single serve sales remain below.
18 period.
They are improving we're confident that our strong performance this quarter. Despite the dramatic shift in consumer behavior puts us in an even stronger position for growth once the economy open back up more Poland.
From a household penetration perspective, we have increased hostesses household penetration and improves our repeat purchase rates to worry cope with it.
In Q2 hostess percent households by increased 10% and exceeded the sweet baked goods category, which increased 7%.
I was just trips.
Growth in units per household were also up versus the prior year period.
Orderly repeat purchases are also so our trial is creating more loyal.
Sure.
We're also pleased that are mixed initiative launched at the beginning of the year and the strategic emphasis to prioritize more profitable hostess branded S.K. used towards the spirit of unprecedented demand hoped to protect our margins and profitability in the quarter.
We believe the diversification we have a cross sale.
Oh, you tears and now categories with cookies has enabled us to be resilient and nimble as we continue to navigate changing consumer behaviors.
As a result of the strategic actions. The team has successfully executed during the quarter adjusted EBITDA significantly outpaced our adjusted net revenue growth with an increase of 22.6% compared to Q2 last year, excluding highest paid.
Our adjusted EBITDA growth was primarily due to a credit margin expansion generated from the successful integration of workmen ahead of expectation and strong core hostess volume growth.
The board integration and transition continues to progress has a plan.
But significant progress the cheating Choo Choo against our stated 15 million annual cost synergies.
Yes gives me confidence that we will.
Deliver more synergies than we initially targeted in year one.
We are incredibly pleased with all we've accomplished workmens you know very short period of time.
No. They look at work in progress in Q1, we completed t. integration activities, including transitioning Boardman DFT distribution model to hostess warehouse Mo.
The U.S.
Canada.
Importantly, warm in what's significant significantly accretive to adjusted EBITDA in the second quarter.
This is quite an achievement given all the operational efforts we have undertaken since January.
We are fortunate to have an experienced team that is proving once again they will continue.
Successfully execute the complex work in integration.
Like they did toward the relaunch opposed.
We continue to expect that our transition costs will be in the range of 25 $30 million as we communicated on our Q1 call. This is $5 million better any initial thoughts.
We're particularly pleased to have a cheap continued working Pos growth in Q2 during our warehouse transition activities, while simultaneously rationalizing almost half of the pre warehouse transition as cases.
Our team is actively developing new products to drive increased distribution into new channel and evaluating additional Glenn.
We're been brand as we position the business future profitable growth.
We are excited about the many opportunities for growth into Boardman business with the progress, we're making as we leverage leading brands or based distribution model focus and tailored customer approach.
Nation promotion expertise and scaled merchandising capabilities.
During the second quarter, we also advanced our innovation.
Core pillar of our long term sustainable growth.
Our innovation can contribution exceeded our expectations in the quarter driven by hostess branded brownies and lemon cupcake.
Our new Tibor tail Twinkie large July 20 person, we're pleased with the consumer reception to this limited edition twinkie rapidly hydro strike packaging.
Going forward, we have a strong pipeline of both core hostess and new platform idea.
As we get our largest selling period with customers more interest rate we will.
Collaboratively with them to optimize programming to meet our dynamic consumer environment.
We made the proactive decision.
Delay the rollout of certain widens prioritized core growth in Q2.
Team is electrically working to be ready could walk to launch when the time is right.
We're also excited about the expanded capabilities, our new R&D facility, which is now up and running inside our one next headquarters office adds to our existing industry leading capabilities.
This facility is design to develop differentiated product and conduct sensory focus group has which underscores our ongoing commitment to consumer insight driven innovation.
Our merchandising team has done an excellent job remaining agile as we flex our business where appropriate to meet consumer needs and consumer shopping habits evolve.
Food at home growth has continued to sustain rate well on the go purchases have started to group, which both.
Bode well for continued growth in the second half of the here.
Oh says that's historically before well both recessionary anglos economists in 2020, but the sweet baked goods cookies categories have continued strong growth as we expected to continue.
As we head into the fall season with strong merchandising hi towards seasonal programming planned in the second half to fuel growth I believe we will benefit from the potential changes in consumer behavior or in the back to school period.
We're excited about the unique ways who's just bring Halloween home, that's another growth that.
In addition, our marketing efforts are increasing in key areas to accelerate growth, including developing new E Commerce programming, which will continue to support our next phase of growth.
We have consistently executed has been proven playbook, which has driven sustained growth over the last five years.
Foundation to grow is strong we never had more opportunities for profitable growth as we strategically and bass business.
Deeply fuel growth.
I'm very proud opposes perseverance and nimbleness in this dynamic operating environment.
Our team is leveraging our core competencies to support record demand by focusing on mix.
Adjusting 'cause customer consumer programming.
Laggardly working with retail partners as we further advance hostess innovation pipeline to drive long term growth.
I remain confident in the progress we've made your today and how these results position us well for the second half a point 20 and into 2021.
We believe hostess will emerge from this volatility in a much stronger position with continued industry, leading growth an industry leading margins.
Now I'll turn it over to Brian because each other this quarter's results.
Thanks, Andy I want to reiterate my continued gratitude to our team.
Results for the second quarter are strong and reflect the culture of performance an excellent you're always building at doses.
We're making disciplined investments of managing cash to support our long term sustainable growth.
Today, I will review, our second quarter 2020 financials and other data from today's release as we think about our business moving.
Net revenue for the quarter was 256.2 million at 11.7% increase excluding the impact of the eyes. The sale of the is the business in August 2019.
Adjusted net revenue was 263 million an increase of 14.7%. Excluding Ais B. This includes 6.8 billion added back to sales related to slotting fees incurred to obtain warehouse space for the board that transition.
This was expected and inline with our acquisition economics.
Increasing adjusted net revenue was primarily driven by the acquisition of work than which contribute adjusted net revenue was 30.4 billion for the quarter as well as strong hostess bread and revenue growth, which was partially offset by lower value brand and private label revenue.
As we discussed at our Q1 call in April we were seeing a decline in our single serve sales of 10% to 15% and an increase our multi pack and back doing up sales of 10% to 15%.
This trend improved over the course of the second quarter and we finished the quarter with single serve Pos down only 5.5% multi pack up 19.4%.
He mentioned, we're seeing this positive trend continue with single serve Pos down only 1% July today.
Gross profit was 89.4 million for the second quarter 2020 gross margin was 34.9%.
Excluding I asked the gross profit increased tended to have reset for the second quarter of 2019. Adjusted gross profit was 90.1 billion or an increase of 21.1%, excluding Ais b, representing an adjusted gross margin of 37.3%.
Adjusted gross profit improved year over year due to high revenue in accretion from more.
Orbitz Q2 margins benefited from the significant ramp in production to support the pipeline filled during the transition to the warehouse model, which resulted in higher operating efficiencies.
During the quarter, we were able to whole core core host as margins flat as higher volume and operating efficiencies offset negative mix impacts at a higher coven related costs.
We expect Tobin related costs, including bakery inefficiencies due to production modifications higher leaves of absences and increase overtime that we incurred due to to be lower in future quarters, if conditions remain at their current levels.
As expected operating costs were higher in the second quarter, primarily due to the addition of warm and add the related transition costs.
Our effective tax rate was 24% compared to 35.2% in the prior year for the prior year effective tax rate was impacted by a discreet tax expense of 2.8 billion.
Net income was 17.4 million diluted EPS was 13 cents. Adjusted EPS was 22 cents per share an increase compared to 17 cents per share in Q2 last year as a result of the accretion from the board that acquisition, the higher EBITDA driven by almost as well.
Adjusted EBITDA for the quarter was 65.1 billion or 24.8% of adjusted net revenue.
Excluding the sale of biased be adjusted EBITDA increased 12 million or 22.6%.
The increase was primarily driven by the addition of Wartman, which contributed about 9 million of EBITDA accretion for the quarter.
Hi, Workman margins and strong hostess bread and multi pack and back done a volume more than offset the negative mix from temporary decline than our single serve sales volume and coker related costs.
We had cash and cash equivalents of 127.8 million net debt of 980.6 million as of June thirtyth, well the pro forma leverage ratio 4.3 times factoring in the expected 2020 EBITDA contribution from board.
We're committed to effectively reducing this ratio over the course here and have a proven history, we successfully reducing our leverage following the acquisitions, while continuing to make disciplined investments for growth.
We remain focused on achieving our long term leverage ratio target in the range of three or four types.
We believe we have sufficient financial flexibility to support our expected future cash needs utilizing our cash on hand at operating cash flows.
Now moving to our outlook.
As you all know we're operating in a volatile.
Well environment with unknown impacts of 19, including potential changes in consumer buying habits, which are highly dependent on future U.S. movement restrictions.
Availability of labor, which is being impacted by government subsidies and both are in our our customer supply chain availability just to name a few.
Assuming no significant impact from changes in these factors, we're now expecting adjusted EBITDA of 230 to 240 million with more than EBITDA contributions of 25 to 30 million.
We expect margins in the second half of the year to be slightly lower than Q2 as operation operating efficiency levels normalized and we increase our investment in merchandising and marketing to drive continued long term growth.
This puts us well on track for achieving adjusted EPS of 70 to 75 cents per share and reaching our leverage target of around four times by the end of 20 Twond.
Despite the temporary uncertainty created by Cobot 19, we remain confident in our underlying business fundamentals, which support our ability to achieve our long term financial objectives, including organic revenue growth adjusted EBITDA margins and free cash flow conversion in the top quartile of our peers with that I will turn.
In the call back to Andy for closing comments.
Thanks, Brian.
We're pleased with our strong and better than expected second quarter in first half 2020 results, particularly as we continue to manage through this dynamic uncertain time created by the Cobot 19 pandemic.
Our core hostess business and Boardman business are both tracking ahead of our expectations based on our team's strong execution and ability they remain agile proving hostesses resilient in evolving economic cycles.
We believe our ability to execute and manage the control aspects of our business in this operating environment would create a stronger hostess or success long term.
Across the team we are working together to further advance our high performance based culture that consistently win with all stakeholders commitment of our people the strong consumer awareness unwilling to the host his brain as well as our agile a mission distribution model well continue to be key competitive advantages in the.
Marketplace Dr. drive strong long term financial performance in the top quartile up our peers as we create value for shareholders for many years to cope.
With that Brian and I are available for your questions.
Operator.
Operator.
I think.
We're having like technical difficulties you could just bear with the second.
Okay, great. Thank you.
So I sound like the operators temporary locks or connection if everyone can does hold on the line. We'd appreciate it. Thank you.
At this time, we will be conducting a question and answer session.
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Our first.
Our first question comes for Rovs Dickerson from Jefferies. Please go ahead. Please.
Great. Thank you so much.
Congratulations on a super cooler.
So well I guess you just have a question on the guidance.
You know your original guidance that you had said carotid Q4 was to 25 to 40 million EBITDA, obviously, there was suspended given everything.
We have all the dealer.
An understandable and now the guidance is to 30 to 40.
You know.
Yes, assuming the moving pieces kind of stay stable by the same time, you had a great Q2, I mean really way above expectations.
Gross margins actually kind of fascinating.
Argue.
And it sounds importance is coming in a lot better than expected. So if we think about trying to back. After this year. Your comment on your margin will be down just slightly.
Also sounds like maybe there could be some increase in marketing and promotional spend im not sure and then also it sounds like there was some volume leverage.
You know that contributed to the margin of importance in the pipeline fill.
But all that being said, you're also saying that maybe the mix component will get better right if kind of veto convenience stores get better the single serve gets better. So I I guess my kind of long winded question, our long winded way of asking is just.
Like what could occur in the back half actually make your results better than you.
Our potentially conservatively think thinking about now.
Why wouldn't that really elevated gross margin at least have some staying power maybe not as good as Q2, but obviously better than weve seen historically add posters. Thanks.
Yes, thanks, Rob the.
If you look overall in our guidance for 230 to 40, obviously, if you think about Novak.
Theres still lot of uncertainty I think is.
In terms of being optimistic and look any upside to your question. Obviously is mix continues to improve over the back yet that would be reasonably optimistic.
Theres, obviously right now is short term, we're starting to see that.
Boardman, we're feeling we feel great about 25 30.
Thank you you obviously there is a lot.
Moving pieces, we demonstrated the ability to navigate operating well.
We feel that's baked into our guys the back half there's obviously.
Yes, if there's any major changes in USA, the restrictions et cetera, but I think.
We feel great about the base business, we feel great about women.
Overcoming we finished Q2 with singles are down, although we've got some mix headwinds and Tailwinds I.
I think that in the back half.
The guys that we that we put more accurately reflects where we feel bad business and.
Obviously, so the answer yes, this from a mix.
Come over to top implicit in your question, Rob I share your optimism from where we're at.
What was executed very well at Q2 was perfect storm vast library as we didn't do any promotion.
We filled the pipeline.
We have we're executing that was 5 million lesson costs, we have planned and you're going to over deliver the EBITDA versus planned synergies or sooner, we're well positioned and all the core business remember our single serve business, which is down pie.
We went into this up three we're we're still planning to flat. So theres a lot of uncertainty, but implicit in your question I share your enthusiasm or said another way we will come out of this stronger than we went into it.
So I feel I feel very confident about as we move forward.
Okay, great Yeah, I, just want to be clear because at first yeah. The stock is down a little bit off the print Q twos, good mix could improve cost at least will coincide seem to be decelerating in the back half and if the environment improves a little bit single serve comes back then it Doesnt sound like let me quite frankly it out.
Data positive scenario margins could actually be stable to up but I'll leave it that thank you.
Our next question comes from Brian Hollenden with da Davidson. Please go ahead.
Yes, thanks, good afternoon and.
Congratulations on the strong execution and the integration of women and what I appreciate that.
Terribly complicated environment to do that is.
First question, maybe just.
2.1 can you give us a sense of how much of a drag that mix impact was on your gross margin in the quarter and also you talked about some of their private label Nonbranded.
Business and maybe you pulled away from how much of that impacted that have on the revenue in the quarter just curious.
Yes so.
The on the margin side.
The we actually saw headwind with singles are being.
And then obviously most of that so that created a little bit headwind from a margin standpoint, Conversely, we had private label.
Is it does well and that helped us from a margin standpoint, so those between that and getting a little bit of operating efficiencies on supply chain side that helped us. So our margins from a basis standpoint were relatively flat and the accretion that we're seeing year over year is driven by border so margins.
If you look at the revenue side.
If you look at where we finished from a revenue standpoint relative to Pos our Pos was up over seven points in I think if you look at our Bayes hostess business that would be more reflective of probably in line with square Pls is referring to close branded business would be allowed were.
Let's finish.
Last year, we actually outpaced POS you look at our revenue growth in the quarter driven by on the private label side.
The value brand side, so if we sort of slipped this quarter and did the opposite in our two year basis I think he's your revenue growth for basis in line with.
With Pos.
Thanks, Brian appreciate the color there and then maybe just as a follow on.
Tacking onto Rob's question earlier.
I appreciate you trying to frame and what is a tough environment to do so what what.
Hi, guys could look like a range of outcomes.
Can you help us understand.
What sort of base level was assumptions used I mean, you. Good you look at where to Q ended you assumed that basically that big change. If you could just to at least directionally, how close understand how occur during the second half given given what is obviously a volatile environment. Thanks.
Sure. Yes. So obviously, if you think about our mix going forward. That's the biggest difficult question to call.
In terms of the outlook, what we've assumed is basically more in line with recent trends.
From a convenient standpoint from a from a large format will tax standpoint, we've assumed recent trends going forward.
I would like us in Q2, we.
Maison choices from a portfolio standpoint to help manage that navigate pretty difficult quarter involve environment. We expect to do the same things going forward and obviously, if there any material shifts in the current environment from a macro standpoint, we that would impact our guide, but the short answer is we're.
Looking at short term trends.
A recent trends, where we're starting to season stabilization to basically feed our validation for the back half year.
Great I'll pass it on that first of all gentlemen.
Thank you. Our next question comes from Ken Goldman with Jpmorgan. Please go ahead.
Hi, good afternoon, everybody. Thank you.
I think you mentioned that single serve July to date is down about 1% did you provide the same number or a range from multipacks I may have missed it.
For July.
Yes.
Yes, So July the multi pack business in terms of what we're seeing.
We'll see quarter to date.
Well, we're having timing is some shifts within general Multipacks are up about 15%.
Just for the year on year comparison, but most action of 50% single serve work its way back to flat is slightly less after being down 5% in Q2.
Right now I got the single serve part thank you for the the multipack number okay.
Then.
Your previous guidance for Boardman synergies was I think 15 million if not more over the over the first 12 to 18 months.
Is there an updated range that we should be thinking about now in light of some of these synergies coming in more quickly.
And are you still looking for 40 to 50 million.
Importantly, EBITDA in 2022 or is that starting to seem a little light to you right now as well.
Okay.
So for me.
Synergies real quickly I think we said as you're right about 12 to 18 were going to get them sooner. So they're coming sooner, which is one of the responding to EBITDA up and then we had a good Q2 related to pipeline fill and efficiencies as we talked about I agree with you that relative to that therefore, given the progress we've made the ex can the execution of the integration I would think.
20, twos Lee and we're looking at moving some of those numbers forward. So you'll see that just if you look at our backend performance we should.
We should be in the bottom half memory, we haven't done our full 21 client I would think about thinking about cross delivery moving forward, but and then continuing to grow as we move into the years.
Thank you very much.
Next question comes from have Kaufman with Morgan Stanley. Please go ahead.
Hi, good afternoon.
I was hoping that you kind of threed aggregate data since may two revenue for rendering the quarter.
You mentioned that dealer later to slotting fees.
Could you just elaborate on that and that's something that is truly one time or do you expect that to continue over the next couple of quarters as well.
Yes, so thanks, bandied slotting fees associated with the conversion moving from a DSC to warehouse, we had a slotting fees to get those important skews into the warehouse model.
We added back because it is onetime in nature.
Got it thanks, and then I was hoping that you can comment on what's the blast at this point.
The integration and.
Obviously the cost synergies are on Youre, Realizing then on an accelerated basis.
Any comments around revenue synergies now that you.
Putting.
Their products through our distribution network and the opportunity that you see there.
Yes, Thanks, Pam for your question.
Youre exactly right. We are moving into the next phase we actually just completed they can't wait wait delayed candidate conversion slightly after the U.S., we're now complete with that including.
Anything related to technology. So it's all a board that's going very well the next phase is really driving.
Making sure that operating model in the short continues operate well so in other words moving forward with the merchandising program have the buyers order at the right way getting district displays.
And then driving those other distributions within both stores and other channel. So think about distribution in a couple of areas. One is the breadth of distribution across channels and DST was not able to get into drug for looking that we're looking at selling into some of the a club channels as well as convenience stores in the back half the year, So thats how.
Happening, but we're also not hold off on innovation as well, we're looking at other innovation platforms and so we can start selling in for launch in the next year. So we're looking to not only the revenue synergies within distribution taken advantage of our breadth of distribution model, but also innovation as well as well all of that's in play right now.
We're engaging with customers in the back half the year. So theres combination of the operational improvements again, the merchandising plans reorder plan cycles going as well as the synergies related to the breadth of distribution and innovation.
Great. Thank you.
Thanks Ma'am.
Next question comes from Bill Chapelle with Suntrust. Please go ahead.
Hi, Thanks, good afternoon.
Hey, Dave.
Well I guess first question, just trying to understand where I mean, if if.
42% of your business is kind of through C stores kind of where are we in the back to normal level. I mean is that halfway there in terms of kind of customer traffic, which you see realizing that summer gas station summer offices are we not even close to that and kind of what are you assuming as we move for the back half a year.
Yes, so I think thats related to date.
You know, sometimes I don't know if there is it back to normal Bill I ask that well what do you attribute to covert.
Yes. This is a fundamental change potentially in the way consumers behave.
Well, let me pack and more lunches back to school. It's good for hostess will they be eating at home one thats good for hostess.
Was related to the C store channel and the traffic as well I see that as potential.
Change as well, we're well positioned for that or shares going we were growing at 3% going into it. We're now at work their way back to you know flattish over the last period.
So it's a start and stop I believe when consumers fully get back to working will be a 100% back.
We've seen it opened up in some areas and traffic move relatively aggressively.
It's hard for me to put a number on it because it stops and starts but we know when we see areas, where the economy opens up our business and our loyalty response right away. The other thing that we're seeing within some of these stores is the pre packaged business is doing better than the fresh section, we're well positioned to take advantage of that which is why.
I think we're seeing some quincy.
Even more so than the traffic Sam overall sales within C stores in us better because.
We're also well positioned to take advantage of the changing consumer behavior is related to freshen pre package.
So I think we.
And as soon as that response, we expect the business do well importantly, we've been able to manage the mix aggressively.
And therefore manage our margins well despite haven declines in a very profitable piece of our business. So when that does come back. It's a very good sign for us moving forward.
Okay. Thank you and then just you kind of touched on back to school, but what are your expectations, maybe ballpark what back to school means to the business and to a lesser extent Halloween I mean I know.
It's not huge but limited the same point I know, you've certainly do some halloween related promotions and displays and stuff like that and no.
I don't want to say that either.
Back to school is cancel more Halloween, but I just didn't know what's your what's you're preparing for.
So we're preparing for us so we've done two things just on a macro level, where we given the high demand in total we've been very disciplined about making sure that we can madison mix and if it was.
One of our less profitable things were smoothen out total demand overtime in the back half to make sure that we can service the breadth of our distribution of all of our customers versus the high Spike. So that's just good for our business related to our fall and Halloween, we actually leave us a rallying cry and consumers seem around bringing Halloween, how we think theres a change it.
Consumers customers are responding extremely well for that that we are we have some of our really iconic and Halloween slavers related to twinkies and cupcakes that are actually sold in above year ago as well as our full programming. So in general across a for Halloween I feel really good I feel and across.
Our hope all programming and feel good because we're really going to grab it onto the consumer behavior around home trusted brands increased penetration and our customers are responding to that merchandising approach.
Got it thanks, so much.
Thanks.
Next question comes from David Palmer with Evercore. Please go ahead.
Thanks, Good evening, Alright, and just to make you repeat that number that you said in relation to Ken's question that multipack take home business sales growth quarter to date.
That goes up against the negative 1% for single serve what was that in July.
I said that multi pack was in general.
About 15% or Bob.
Okay and so it's.
I'm wondering you mentioned there were some relative weakness in some off in the non measured channels stuff in the second quarter. It sounds like you're maybe shipping more quickly.
Versus consumption because the consumption. This is very lately because consumption has been bouncing around above and below flat levels lately I'm wondering if.
Is there any dynamic where you perhaps under shipped a little bit on consumer versus can.
Consumption in the second quarter, and you're coming on strong here and as some of this strange.
Beyond measured channels I'm trying to understand how so Dave that strong dancer, David in measured channels. So I was I had basically at Q2 number measured channel that you're talking about was up about some of the 4% that that's just timing is that some timing of merchandising as we lap and prioritize.
Some of the profitable merchandising versus year ago, our shipments continued to be relatively strong, but they are more everyday versus some of the big events say, where we've left I think in the last four week periods will continue to see some of that comparison probably over the last.
The next several weeks I think thats, where you're looking at yes, okay. So thats what I, that's definitely when I was getting at because it seems like.
That may be them to take on packaging. The multipacks has slowed lately and I was wondering if there's anything related to that with the recall that happened with the raspberry Zingers Thats, 2% mix I don't suppose has that been a material thing.
That's minimis I was isolated we there is nothing we take more important than the safety and the quality of our products. It was a very isolated.
Event was minimis relative to the percentage of our revenue and at an abundance of caution we just pulled it.
And then I don't think I heard you talk about the private label in vending business very much before and that that sound. You said. It was lower margin is also relatively soft. This last quarter is how big of a portion of your business is that it is that a meaningful mix driver.
Well, it's less than five it's about 3% less than 5% of our business. Okay. A lot of that comes out of our CLO real acquisition is low margin.
So it did help the mix related to our margin as Brian mentioned.
So that's the van business, which is down meaningfully as also in a few remember in the beginning of the year aim is we got ahead of optimizing our portfolio and had a mixed initiatives to make sure. We're.
Optimizing our assets. So we did that early.
In the year, but then continues to be very soft.
And then one last one I'll I'll pass along onboard means from a revenue synergy standpoint.
Clearly, that's that's something that a business that has a presence north of the border.
And I know has more exposure to one coast versus another.
Well when does that with the revenue synergy part apartments really kick in for you in your opinion and I'll pass it on thanks.
Yes, Thanks, David.
Well start seeing that I think beginnings in really kicking in in Q4 now if you remember awarded.
We've established a more profitable.
And meaningful platform to grow up so we we reduce cut about half of the SK use reset it in a very positive and meaningful way and then are growing from there and still maintain growth despite that reduction which is much more efficient.
But we're starting to see some of the distribution growth that will start accelerating as we get into Q4 in the back half of the year as we sell in some of our really exciting ideas and plans with customers here in the September in the fall period.
Thank you.
Thank you I would like to turn to Florida switching management for closing comments.
Thank you very much and thank you everyone for your participation and interest in hostess I would like to thank our dedicated team for their tremendous efforts to maintain a high performance culture in hostess. This dynamic environment, our core capabilities resilience and operating model gives us car.
Often instead hostess will emerge from this are stronger and better position for the long term for sustained profitable growth.
At a safe and happy Reston summer. Thanks again.
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