Q4 2020 John B Sanfilippo & Son Inc Earnings Call
Then one on your telephone.
Please be advised that today's conference maybe recorded if you're acquiring you further assistance. Please press Star then zero.
Now I'd like to hand, the conference over to your Speaker today, Mr., Michael Valentine Chief Financial Officer. Thank you. Please go ahead.
Thank you Jamie good morning, everyone and welcome to our 2024th quarter and fiscal your earnings Conference call. Thank you for joining us today on the call with me is Jeffrey Sanfilippo, our CEO and Jasper Sanfilippo our COO.
Before we start we may.
Make some forward looking statements today. These statements are based on our current expectations and they involve certain risks and uncertainties that are inherent in our business.
Factors that could negatively impact results are explained in the various FCC filings that we have made including forms 10-K and on occasion forms 10-Q.
We encourage you to refer to these filings to learn more about these risks and uncertainties that are inherent in our business.
I'll start the call today by covering financial highlights for the fifth for the 2024th quarter in fiscal year.
The current fourth quarter net sales decreased by 5.8% to 204.2 million compared to net sales of $216.8 million for the fourth quarter fiscal 2019.
The decrease in net sales in the quarterly comparison was primarily due to a 3.3% decrease in our weighted average selling price per pound the decline in the weighted average selling price came from a shift in product mix from higher priced almonds, and pecans and walnuts to lower priced trail and snack mixes and peanuts.
Lower selling prices for cashews, which resulted from lower acquisition costs also contributed to the decline in the weighted average selling price.
[noise], a 2.6% decline in sales volume, which is defined as pounds sold to customers also contributed to the decline and that sales.
Sales volume increased in the consumer distribution channel by 16.1%.
The volume increase in the consumer channel was primarily driven by a 25.2% increase its private brand snack nut and trail mix sales.
With existing customers approximately 59% the total sales volume increased in the consumer distribution channel occurred in April most of which we attribute to continued pantry loading in response to cover 19.
Sales volume declined by 43% and the commercial ingredients distribution channel, primarily due to 63.3% decline in sales volume to food service customers. The decline in foodservice sales volume was due to stay at home orders restaurant closures and a decline in air travel again as a result of cope.
19.
The decline in foodservice sales volume was offset in part by increased sales of peanut crushing stock peanut oil processors.
Sales volume declined by 32.4% in the contract packaging distribution channel, primarily due to some lost business with one customer that increased its internal not processing capacity.
And the unfavorable impact of lower convenient store foot traffic on another customers business in this channel again as a result of corporate 19.
Looking at sales volume for brands in our consumer channel Fisher recipe nut volume increased by 3.4% and that was primarily due to higher online sales as consumers are cooking in baking more frequently and reducing their trips to physical stores.
The 43.3% decrease in sales volume for Orchard Valley Harvest brand, primarily came from temporary store closures at a major customer in the non food space and some lost distribution at another customer.
Fisher snack nut volume increased by 1.6% and that was mainly due to or I'm, sorry decreased by 1.6% and that was mainly due to a cancel promotion at a major customer in the home improvement space.
That was offset in large part by distribution gains in grocery stores for our often roasted never fried product line.
Sales volume for southern style nuts decreased by 3.8% as a result, some lost distribution at a major customer and lower promotional activity at other customers. These were offset in large part by increased sales and club stores and online sales.
[noise], we attribute the cancellation and lower.
And lower promotional activity for Fisher snack nuts in southern style nuts to a general unwillingness on the part of retailers to execute promotional activity as a result covert 19.
Fiscal 2020, net sales increased by <unk>, 0.4% to $880.1 million compared to fiscal 19, net sales of $876.2 million, while sales volume increased by 6.1%.
A 5.3% decline and the weighted average selling price per pound offset nearly all the positive impact on net sales from the sales by an increase in the year comparison.
The majority of the sales volume increase was driven by growth in lower price trail and stack mixes and peanuts, which drove the decline in the weighted average selling price per pound.
Lower selling prices for products containing cashews and pecans driven by lower commodity acquisition costs also contributed to the decrease in the weighted average selling price per pound.
Sales volume increased by 13.7% in the consumer distribution channel and that volume increase was primarily driven by increased sales of trail mixes and snack nuts.
To do to distribution gains with new and existing private brand customers as well as increased sales of southern style.
Products.
[noise] sales volume declined by 6.9% in the consumer ingredients distribution channel and by 13.8% and the contract packaging distribution channel for the same reasons I cited previously in the quarterly comparison.
Gross profit decreased decreased to $40.7 million into fourth quarter fiscal 20, compared to $43.6 million than last year's fourth quarter gross profit margin was 20% of net sales compared to 20.1% of net sales in the prior fourth quarter.
The decline in gross profit was due primarily to the declines in foodservice and contract packaging sales volume, which were offset in part by gross profit generated from the increase in sales volume in the consumer distribution channel lower commodity acquisition cost for cashews and reduce manufacturing spending per produce pound.
Due to manufacturing efficiency gains.
The current quarter also included $1 million in Cobot 19 related bonus expenses paid to where it is essential manufacturing employees and that ceased in the latter part of the current fourth quarter.
Total operating expenses for fiscal 2020 decreased by 2.5 or excuse me gross profit for fiscal 2020 increased to $175.8 million compared to $158.3 million in fiscal 19 gross profit margin increased to 20.
Percent of net sales from 18.1% of net sales for fiscal 2019 increases in gross profit gross profit margin were primarily due to increased sales volume and the consumer distribution channel lower commodity acquisition cost for cashews and reduce spending per produced pound due to manufacturing.
Wyszynski gains.
Total operating expenses decreased by $2.1 million and total operating expenses as a percentage of net sales decreased to 12.3% from 12.5% in the quarterly comparison.
The decrease in total operating expenses in the quarterly comparison was mainly attributable to declines and incentive compensation consulting and travel expenses.
These decreases were offset in part by increases in product donations to food banks and higher recruiting expenses.
Total operating expenses for fiscal 2000 decreased by $2.5 million and total operating expenses as a percentage of net sales decreased to 11% from 11.4% in fiscal 19. The decrease in total operating expenses came from declines in advertise.
Moving freight legal and consulting expenses.
A gain of $900000 from an insurance recovery related to a fire in our carried for North Carolina facility and that buyer occurred in the second quarter fiscal 20 also contributed to the reduction in operating expenses.
These reductions were offset in part by increases in expenses for payroll and payroll related and incentive compensation product donations food banks and broker commissions.
Interest expense decreased to $500000 for the fourth quarter fiscal 20 from $600000 in last year's fourth quarter and interest expense for the current fiscal year decreased to $2 million from $3.1 million for fiscal 19.
The decrease in the quarterly comparison resulted primarily from lower interest rates and the decrease in interest expense in the yearly comparison came from lower average debt levels and lower interest rates.
Net income was $10.3 million or 89 cents per share diluted for the fourth quarter fiscal 20, compared to 11.3 million or 98 cents per share diluted for the fourth quarter fiscal 19.
Net income for fiscal 2020 was a record $54.1 million or $4 in 69 cents per share diluted compared to net income of $39.5 million or $3.43 per share diluted for fiscal 19, now taking a quick look at inventory.
The total value of our inventories on hand at the end of the current fiscal year increased by $15 million or 9.6% compared to the total value of inventories at the end of fiscal 19.
The increase in the total value of inventories was primarily due to higher quantities on hand for peanuts, cashews and almonds as well as higher acquisition costs for Peanuts and Wallace.
These increases were partially offset by lower acquisition costs for pecans.
The weighted average cost per pound of our Ron nut and dried fruit input stocks on hand at the end of the current fourth quarter fell by 7% compared to last year. This decline was due to an increase in the quantities of lower price peanuts on hand, compared to a higher price tree nuts.
Lower acquisition cost for Cashews and pecans also led to the decline in the weighted average cost per pound of our run out and drive food input stocks.
And now I will turn the call over to Jeffrey Sanfilippo, our CEO, who will provide additional comments on our performance for the current quarter in fiscal year Jefferies.
Thank you Mike good morning, everyone.
After reporting record results for our third quarter of fiscal 2020. The company finished the year strong despite significant headwinds from the impact of Covidien 18, and the dramatic shifts in consumer behavior and consumption trends at the start of our fourth quarter.
Navigating through a challenging landscape in the fourth quarter fiscal 2020, the company's still ended the year by breaking records in gross profit, which increased by $17.5 million were 11.1% to $175.8 million net income reached a record 54.
$1 million as Mike mentioned and earnings per share reached a record $4.69.
Our five production facilities are essential businesses and have stayed open through the pandemic to sustain the food supply chain I.
Im so proud of the hard work dedication and leadership of our team members throughout the company.
They showed up to provide essential goods for our customers. They showed up to service our consumers and they showed up to support their families and to support each other.
Especial. Thank you to our manufacturing teams, who come to work everyday and continue to stay focused on operational efficiencies in production to reduce spending per profit per produce pound while at the same time, providing best in class service levels for our customers and consumers.
Our strong financial position allowed us to paid cash dividends for the ninth year in a row, we paid $68.7 million during fiscal 2022, our stockholders and we are paying bonuses to each of our exceptional associates throughout the organization who work together this past year.
These are extremely extrude. These are truly extraordinary times for all of us.
To pandemic had positive and negative impacts upon our results for the fourth quarter of fiscal 2020.
We saw strong evidence of a shift in consumer preferences to shop in smaller store formats like grocery stores and via the Internet.
Based on IRA total us multi outlet market data consumers are also doing much more cooking and baking at home with the entire baking category sales increasing by 49%.
Internet based sales for our brands increased by 365% led by strong increases in our market, leading Fisher recipe nut line.
On the other hand closures for restaurants, and other food service establishment throughout the country negatively impacted our foodservice business.
However, we were encouraged by significant improvement in foodservice business as some reopenings occurred in the fourth quarter.
Overall, our foodservice sales volume declined by 19% compared to April of 2019.
While in June our foodservice sales volume declined by 34% compared to June of 2019.
In snack nuts, and snack and trail mixes we saw a significant shift to lower priced private label products from national branded products.
Based on changes in our item mix. We also saw consumer preferences shift from single serve grab and go items to large pack sizes, such as 32 loans jars and stand up bags.
The shift to larger pack sizes allowed us to capture significant efficiencies in manufacturing and distribution.
We believe we are well positioned to take advantage of these dramatic changes in consumer preferences in risk Sprague's respect to product line diversity and manufacturing capabilities.
In recognition of these changes we also bolstered our marketing and innovation leadership by adding individuals for major consumer product companies, who have significant experience in managing brands in a changing environment.
The company's long term objective to drive profitable growth includes three pillars.
Continued to grow Fisher Orchard Valley harvest scroll brand and southern style nuts into leading up brands by focusing on consumer insights in the snack recipe trail snack mix and produce categories to provide integrated nut solutions to grow private brand businesses in each distribution channel.
And three expand our offerings into alternative distribution channels.
With new resources added to sales marketing innovation and research and development Jvs US, we'll execute on our strategic plan to grow our branded business by reaching new consumers via product and packaging innovation expanding distribution across current and alternative channels and.
Focusing on new ways consumers are purchasing food with an emphasis on E commerce.
Turning to year end sales review by business channel.
And the consumer channel net sales increased by 7.9% in dollars and 13.7% in sales volume in fiscal 2020 compared to fiscal 2019.
Sales volume increase as Mike mentioned was driven by increases in trail mixes and snack nuts, with new and existing private brand customers.
There are significant opportunities in fiscal 2021 to grow our consumer sales with both private brands and with our strong branded portfolio.
Especially in E Commerce grocery and club, where we expect those segments to continue to benefit from shifts in consumer buying.
Net sales in the commercial ingredient distribution channel decreased by 16% in dollars and 6.9% in sales volume compared to fiscal 2019.
Mike talked about the decrease in sales volume due to decreases in foodservice from restaurant closures a decline in air travel and the various nationwide stayed home orders as a result of Covidien 18.
But prior to the start of statewide locked loans and travel restrictions are foodservice business was on track for strong growth.
Our commercial ingredient sales and marketing teams have done a great job building customer relationships and expanding distribution.
We have since reallocated and reposition some resources to pursue alternative channels to follow changing demands for our products.
In the contract packaging channel net sales decreased by 20.7% in dollars and 13.8% in sales volume.
This channel for JV assess has seen decline in declines in sales volume in the past few years, and we have real reallocated some resources from contract packaging to focus on other priorities.
This channel was particularly impacted in the negative way by Cobot 19 as trips to convenience stores declined significantly for key customer in this channel.
Turning to category updates.
I will share some brand, resulting category results for the quarter.
As always market information I'll be referring to is IRA reported data and for today. It is for the period ending June 21 2020.
When I refer to Q4, I'm, referring to 13 weeks of the quarter ending June 21st.
References to changes in volume and price our versus the corresponding period, one year ago.
We look at the category and Iras total us definition, which includes food drug mass Walmart military and other outlets unless otherwise specified and we discussed pricing we are referring to average price per pound.
Breakouts of the recipe snack and produce categories are based on our custom definitions developed in conjunction with Fireeye.
And the term velocity refers to the sales per point of distribution.
As has been mentioned cobot 19 had positive and negative impacts upon our results for the fourth quarter. We saw strong evidence of a shifting consumer preferences to shop in smaller store formats like grocery and online.
First let's roofs review some category dynamics.
The total net category increased in both sales dollars and pound volume by 5% in the fourth quarter. This was in line with the growth rate. We saw in Q3 and ahead of the category growth rate in the first half of our fiscal year.
Overall prices for the quarter were flat versus the prior year.
Now I will cover each category and a little more debt starting with recipe nuts.
Based on our total us multi outlet market data consumers are doing much more cooking and baking at home with the entire baking now category sales increasing by 49%.
The impact of the pandemic is significant when it comes to people preparing more meals at home.
This change in consumer behavior is driving strong recipe recipe nut category growth.
In Q4, the category increased 28% in dollars and 24% in pound volume.
Despite strong category growth our overall Fisher brand continues to be challenged by decline in on shelf placement with the key retailer.
Fisher recipe nuts decreased 6% in dollar sales and 10% in pound sales for the quarter versus last year.
As a result Fisher share in that category decreased 5.6 up.
Pound share points versus last year.
The decline in pound volume at retail is due to lost distribution at a major customer in the mass merchandising sector, which was offset in a large part by pound volume growth in grocery team.
In traditional grocery, which IRA caused a us food channel Fisher recipe increased 44% in pound volume behind the cobot based trend referenced above where consumer shifted their spend to grocery.
Fisher continues to be the branded share leader in the recipe category when using the broader multi outlet definition or within the U.S food channel.
Now, let me turn to the snack category in Q4, the snack category increased 6% in dollar sales and 9% in pound sales.
Fisher snack increased 27% in dollar sales and 21% in pound volume in Q4, driven by 19% increase in total points of distribution.
This growth was primarily driven by the Fisher of and Rose never fried line as we continued to expand beyond the core Fisher geography, and increased pound sales by 109%.
PON velocity and total points of distribution increased by 31% and 60% respectively versus last year.
Pound volume for our southern style and up brand at retail increased by 7% in the quarter due to a distribution gain with a new customer while pound volume for the total trail and snack mix category decreased by 3% in the quarterly comparison.
In Q4, the produce net category increased 3% in dollar sales and decreased 3% in pound volume sales.
Orchard Valley harvest, our produce nup brand decreased 30% in pound sales, resulting in a pound share decline of.
Five versus points versus last year.
The volume decline was due to some lost distribution at one key customer.
Within traditional grocery OVH was flat in dollars and declined 1% in pound sales.
In closing fiscal 2020 was a strong year, especially considering the dynamic changes we've all experienced since March.
This success as possible possible, because we have talented people across our organization and we invest in them to do what matters most to drive results.
We are executing our growth strategies implementing continuous improvement projects throughout the organization to optimize our cost structure and we continue to invest in our people brands and processes to better serve our customers and consumers and create value for our shareholders.
We will continue to face challenges in our fiscal 21 as result of the Cobot 19 pandemic continues our company continues to follow recommendations made by state and federal regulators and health agencies to ensure the safety and health of our employees.
We know there is uncertainty about future local and federal restrictions aimed to mitigate and control the pandemic.
As these restrictions were loosen during the fourth quarter of fiscal 2020, we saw a gradual increase in demand from our foodservice restaurant convenience store and non essential retail customers.
While we realize this is a fluid situation. We believe the company is in a very strong position to respond to changes quickly and continued to grow our business.
The management team dedicated employees have a steadfast commitment to develop business opportunities that creates shareholder value and provide relevant profitable innovative products and services to our customers and consumers across all our channels.
We appreciate your participation in the call and thank you for your interest in our company.
Ill now turn the call back over to Mike.
Okay. Thank you Jeffery at this time, we will open the call to questions. Jamie can you. Please queue up the first question.
Thank you as a reminder, if you'd like to ask your question. Please press Star then one on your touched on telephone to withdraw your question from the Q. Please press the pound key please standby we compile the human a roster.
Our first question comes and Chris Mcginnis with Sidoti and company. Your line is now.
Good morning, Thanks for taking my questions and nice quarter.
Morning, Chris.
I was wondering what I was wondering if you can maybe just talk around trends.
And I think probably around the consumer but also.
Really the food service I guess, you provide a little color on food service progressing this quarter. We can also maybe kind of give us an update of to since the quarter ended but also how the consumer trend is above that quarter, maybe where you're exiting at on.
On the demand side. Thanks.
Chris This is jeffery so since April really we've seen continued drum dramatic shift in consumer behavior. If you just look at some numbers since April the grocery channel has actually grown 22% since April we see growth in the dollar store channel.
Channel was up 24.5% since April E Commerce, though is where you're seeing that most dramatic growth it's up over 82% since April and consumers that never bought online have purchased product online they've gotten used to the technology either.
Like the convenience of buying online having it delivered to their homes were easily picking up at a local retailers and so we expect to continue to see growth in E Commerce and as I mentioned on the call Weve Reprioritizing or reallocating additional resources to E commerce to take advantage and follow consumption, where it's going well we see.
Strong growth in the club channel as well and lot of markets like the club channel for example, somewhere where we're not very well developed and so we have a key focused on building a strong platform in the club channel I wanted to follow consumer.
Growth in that channel.
Foodservice as I mentioned, we saw some positive.
Reductions in declines I guess, you would say in.
In June as a result of some deal we openings of states and restaurants, we just watch it we monitor it very closely I will say that June and July we're actually July we saw a little bit more positive growth rebounding from some of this day closures and some volume pickup in the foodservice channel, we do expect with the flow.
Patient with the pandemic on that.
This is difficult to say what will happen, but we're optimistic that as things settle down we'll see some of that growth rebound in foodservice.
Great.
Appreciate it.
And I guess, just thinking about how are you taking advantage of that and that especially the significant increase in the E. Commerce are you changing branding or you're thinking of marketing just maybe dig in a little bit about taking advantage.
Sure. So we actually had a greeley strong position going into the pandemic. We've spent a lot of time. This past year on building a strong E commerce platform, both for our brands on Amazon and at Walmart Dot Com. So we were prepared and in a well in a good position to take advantage of the spike is.
Consumer started to buy online we are reallocating marketing investments towards more social media and moving away from some of the typical effect size. Another radio advertising that we were doing in the past and reallocating some of those resources to E commerce, it's a different way to approach consumers, but.
It's certainly the right thing to do.
Great.
And I guess, just a couple of wins and losses throughout the portfolio can you just talked maybe a little bit about your customer base in the health you're seeing and.
I guess any changes longer term you think about.
Where the brand for going where they've been.
So.
Sure and so as I've mentioned on previous calls we have a very low HCV and a lot of our brands and so theres so much opportunity to expand organically through just our current brand distribution. So we are laser focused on that as I mentioned the grocery channel has grown dramatically as a result of the pandemic and so our sales.
In marketing teams and innovation in R&D are are really focused on building our branded distribution in grocery.
Because just we just see the increasing growth there and so we're focused on expanding our distribution expanding our HCV and also looking at the category in a different way I mentioned that you were seeing less of the multi pack single serve a format as consumers lifted by larger size formats. So were adapt.
And quickly to those consumer changes as well in changing some of our pack sizes, both on our brands and in private brand as well.
And I guess just on that last point.
Obviously really good success with that product flat both over the last year.
Leasing trends as with our is states are starting to open.
Have you seen any change of back of those maybe picking back up.
Lately or or no.
Yes, it's it's hard to say because we don't have really good gate on exactly how many restaurants are opened what the restrictions are on those restaurants or service outlets. So it's really difficult number two too.
Japan can we just don't have good accurate information and what percent are open ended when they are what percent of people are allowed to come into the the restaurants, but we're optimistic people will.
Regain confidence in going out once things settle down and hopefully we have some some solutions for for the current situation with the pandemic, but we just believe it's going to take some time.
For customers to get confident to go back on a regular basis.
So we're optimistic and Chris. This is Mike you know as we noted in the release April and food service was down 19% on sales volume in that improved to negative 34%.
And I just want to stress that the 34% says probably not the best run rate to pick.
Because there was some inventory replenishment going on but certainly we feel like a going forward.
The significant declines that we saw in.
Both April and May should not.
To be the kind of decline percentages, we see going forward.
Sure.
Yeah, I also want to mentioned that our foodservice team has done a great job diversifying you focusing on where consumers are shopping or with the needs are in the foodservice channel and in just the enormous growth in meal kits and obviously people are traveling as much and and so they are looking different snacking options, but the team has done a great job from.
Unities to still supply customers within the foodservice and commercial ingredient channel with food products, whether its meal kits food banks that are so desperate for products now the team is really responding. So we didn't know restaurants night might not be come back in full force. This team is really focused on looking at other opportunities to continue to grow that channel.
Yeah.
Yes.
And I guess, just a maybe a bigger picture of the around the industry itself.
Can you maybe just talk about the competitive landscape and what's happening in may be.
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Environment.
What's in the for you to go out on a good yet more share.
Thank you think about the industry.
Sure.
So so it's a dynamic time I'm sure all companies are reacting in challenge with that shifts in not only consumption, but the timing. We saw this when we saw the huge pantry load in March and April. It was that would have been very difficult for lot of companies to meet those demands because of our investments in our.
In our capabilities our manufacturing in production and operations, we were able to meet those increased demands that were just dramatic for any business and I have to believe that some of our competitors, who didnt have such a large infrastructure or may not have made some of those investments would have been more challenged than jvs.
But the competitive landscape, we haven't seen dramatic changes at this point, we still have the same private brand competitors. We saw the same branded competitors people I think are shifting some of their marketing focus as we are so we expect competitive landscape not to change to dramatically.
Okay I appreciate that.
And I guess, just two more questions.
Q, but maybe just talk around the maybe new product introductions, you have lined up and is that change given the environment.
Yes, I title due to bolt, it's really a right now it's some of its pack size going from multi packs and small single serve some larger size packs.
Not a dramatic innovation, but it's something that is in a change in some of the packaging in the product portfolio.
We launched our chip chip, which is our first entry into non nudge snacking last year and we've seen some positive growth in the places where we have distribution. So you should continue to see us focused on that product line, it's kind of the.
Stepchild, we don't talk about it a lot because it's such a small brand at this point in small launch, but we see opportunities in that that.
The net snacking portfolio, we continue to look at nut Butters, we're still continuing to do test on the nut butter program and we continue to look at other did.
Really indulgent snacks with our scroll brand in some other products that we're looking at as well.
Great.
And then I guess, maybe Mike this might be more for you, but just in terms of thinking about the impact of the changing.
No prices for up year, how much of a headwind is that.
The next 12 months and then.
In the same.
Line of questioning is around maybe the margin profile for the mid year.
Yes.
Different things happening within the portfolio. Thanks.
Well I would actually characterize what's coming our way as a tailwind.
We're seeing just about every tree nut go down pretty significantly year over year with much larger crops.
And that includes a almonds walnuts.
Cashews, and even peak times and pistachios.
And then on the Peanuts side, we're coming off of one of the.
Worst quality crop yours that I can recall in my 30 year history and we.
We incurred quite a additional modify processing costs to.
Remediate those quality issues that were inherent in the crop we shouldn't have to deal with that next year. So.
Really across the board on the major not types.
Oh, I would I would characterize it as a big tailwind for us.
Yes.
And then maybe just on the margin profile with both the change in kind of a mix I think.
Honestly would decline from the other two segments.
You know you took advantage of that.
See that makes me these Martin as this margin profile stable over the next 12 months.
Well sure generals, our business continues to shift from contract packaging to consumer.
You know that that's certainly going to have a favorable impact also.
Introduces a foodservice rebounds.
With that ill that'll help the margin story too.
Great.
Thanks for taking my questions do you want.
Thanks, Chris.
Thank you and as a reminder to ask a question you will need to press Star then one on your touched on telephone. Our next question comes a Joey I'll begin with cable or capital management. Your line is now open.
Good morning, Thank you for taking my questions.
Morning.
Morning.
Right. So in the press release, you said that the business was especially hit hard due to some temporary store closures, especially with the Orchard Valley harvest brand.
And decreased promotional activities at least in the physical stores are those stores reopening and will the marketing start to ramp back up.
Yes. This is jeffery so Joe yes, they are starting to reopen I'm not 100% and again I think there they're restricting the amount of consumers that can enter the storage is for safety purposes, but I will say that they have started to reopen sourcing that distribution pipeline refill again.
Okay awesome.
And so.
Well the so noted the you guys mentioned in the home improvement stores that cancel the promotion for the recent quarter well.
Okay.
At least that specific home improvement stores will that hold similar promotions in the future or are you guys more focused on the online sales.
It's a combination obviously, we want to make sure that we have product available where consumers are shopping whether they're going to a home improvement store were sitting at home in at their computer shopping online I will tell you. There has been a shift in retailer dynamics as far as how they're promoting there they are really being careful on running huge promotions as they used to because they want.
To make sure they keep.
The essential items on their shelves. They don't want to have a lot of set up in their retail stores just to mitigate the amount of people that are working in their stores. So we have seen dramatic shifts in that type of ways retailers are promoting that's why you saw the shift in some of the promotional activity because retailers are looking at different ways to to promote.
Product without having to put a lot of people on the floor building shipper displays and setting up promotions.
Okay.
So I guess jumping off of that then should we expect more online sales to continue to grow within the net our rest of the year or do you think it will decrease as more physical stores open.
Not that you're going to continue I think thats one thing that's going to stick from his pandemic is the result of online shopping.
Consumers that have never shopped online are now comfortable with doing it and you won't lose those consumers I think you won't see the dramatic increase in growth in E commerce, but I think you're going to continue to see growth. There I just I believe that people have gotten accustomed to the simplicity of it the convenience and the safety of of shopping online.
And the clicking pick where your shopping online, but the new swing by in pick up the product is becoming more.
Important in more popular now as well.
Joey This Mike I would also add that up.
There the.
What we're selling online.
Compared to these non food retailers that are reopening our really two independent things now they're not necessarily a competing with each other so you know we believe that as more off foot traffic goes through the apparel space in the home improvement space, where we have some distribution.
That actually should be a job.
Incremental and will win for us.
Okay, Austin and if I can sneak just one more question in their incremental.
Minimis speculation but.
I thought I know that you guys have of a much increased inventory level and I know that a lot of your competitors are are kind of struggled with that huge increase in demand and April.
Hi, So I know that the holiday season coming upon us and a few months you guys think that you'll be able to gain market share or.
Something with your increase capacity.
Well I don't know our inventory levels necessarily put us in a position to do that.
But you know certainly are minimal if we look at a more on the.
Okay packaging capabilities and a in machinery and equipment all that we have some really good.
Capacity and capabilities there to take advantage for that.
Right.
Perfect that's.
All right Thats all my questions. Thank you so much thanks Joey.
Thank you and I'm showing no further questions in the queue at this time I'd like to turn the call back to Michael Valentine for any closing remarks.
Okay. Thank you Jimmy again, thanks, everyone for your interest in JV assess this concludes the call for our fourth quarter in fiscal year 2020 operating results.
Ladies and gentlemen, thank you for your participation on today's conference. This does conclude your program and you may now disconnect.
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