Q4 2024 J&J Snack Foods Corp Earnings Call
Good day and welcome to the J&J snack foods fiscal 2020 for fourth quarter Conference call. At this time, all participants are in a listen only mode.
After the Speakers' presentation, there'll be a question and answer session.
This will be given at that time.
A reminder, this call may be.
Speaker Change: I would like to turn the call over to Juniper to Aha Investor Relations. Please go ahead.
Speaker Change: Thank you operator, and good morning, everyone. Thank you for joining the J&J snack foods fiscal 2020 for fourth quarter Conference call.
Speaker Change: Before getting started let me take a minute to read the safe Harbor language. This call contains forward looking statements within the meaning of the private Securities Litigation Reform Act of 1985.
Speaker Change: All statements made on this call that do not relate to matters of historical facts should be considered forward looking statements, including statements regarding management's players strategies goals expectations and objectives as well as to our anticipated financial performance.
Speaker Change: Statements are neither promises or guarantees and involve known and unknown risks uncertainties and other important factors that may cause results performance or achievements to be materially different from any future results performance or achievements.
Breast or implied by the forward looking statements.
Speaker Change: Risk factors and other items discussed in our annual report on Form 10-K for the year ended September 32023.
Speaker Change: And our other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by forward looking statements made on the call today.
Any such forward looking statements represent managements estimates as of the date of the call today November 14th 2024.
While we may elect to update forward looking statements at some point in the future. We disclaim any obligation to do so even if subsequent events cost expectations to change and.
Speaker Change: In addition, we May also reference certain non-GAAP measures on the call today, including adjusted normalized sales EBITDA adjusted operating income or adjusted earnings per share all of which are reconciled to the nearest GAAP measure.
Speaker Change: The company's earnings press release, which can be found in our Investor Relations section of our website.
Joining me on the call today is David Fastener, Chief Executive Officer, along with Ken <unk>, Our Chief Financial Officer.
Speaker Change: Following managements prepared remarks, we will open the call for a question and answer session.
Speaker Change: With that I would now like to turn the call over to Mr. Fassler. Please go ahead Dan.
Dan Fassler: Thank you Humberto.
Speaker Change: Everyone and thank you for joining us today Jamie.
Speaker Change: J&J snack foods achieved another year of top and bottom line growth in fiscal 2024, we not only achieved record annual sales and gross profit, but also set new highs for adjusted EBITDA.
Speaker Change: And we achieved our financial goals of improving gross margin rates.
Speaker Change: Delivering improved supply chain metrics and growing profits faster than sales.
Speaker Change: Adjusted EBITDA increased 10, 2% in fiscal 2024.
Speaker Change: More importantly, these results were achieved during a dynamic consumer and economic environment that impacted traffic and spending.
Speaker Change: Key channels, including amusement convenience.
Speaker Change: <unk> restaurant and retail.
Speaker Change: Despite pressures on consumer spending we continue to grow sales on a year over year basis led by incremental placements of core products.
Speaker Change: Brands product innovation and new customer wins.
Speaker Change: I'm, so proud of our employees, who continue to execute a well aligned long term strategy that positions J&J for continued profitable growth.
Speaker Change: As we discussed our performance is.
Speaker Change: Important to remember that we had one less week of selling days in fiscal 2024 compared to fiscal 2023.
Speaker Change: This impacted fourth quarter sales by an estimated $33 million.
Speaker Change: We referred to it as normalized sales in our discussions today to better explain what we feel is a more accurate apples to apples comparison.
Speaker Change: For the year, we grew sales, 1% on a reported basis and two 8% comparing result on a normalized basis.
Speaker Change: Definitely proud of our double digit growth in adjusted EBITDA led by an 80 basis point improvement in gross margins to 39%.
Speaker Change: Along with a 110 basis point improvement in adjusted EBITDA margins for the full year.
Speaker Change: Looking at our fourth quarter results reported sales decreased three 9% how's.
Speaker Change: However, on a normalized basis sales increased three 9%.
Speaker Change: Softer consumer trends, along with fewer selling days impacted sales of our higher margin products during the quarter, including soft pretzels, churros frozen beverages frozen novelties and different dots.
Speaker Change: This resulted in a less favorable gross margin mix and created production inefficiencies as we adjusted inventory levels across our plants and distribution centers.
Speaker Change: As a result, our gross margin decreased 110 basis points for the quarter to 31, 8%.
Speaker Change: Compared to our record fourth quarter of fiscal 2023.
Speaker Change: Operating income and adjusted EBITDA decreased four 5% and 4% respectively.
Speaker Change: Despite these challenges in the fourth quarter, we managed operating expenses, well improving by 110 basis points and achieving net earnings as a percentage of sales of six 9%.
Speaker Change: System with the previous year.
Speaker Change: Kevin will review financial performance for the fourth quarter and fiscal year in more detail in just a few minutes.
Speaker Change: I'd like to emphasize the importance of our strategy and how it aligns with our results over the last year.
Speaker Change: Our J&J team remains relentlessly focused on executing our strategy of growing core brands, creating cross selling opportunities to drive incremental sales.
Speaker Change: Each quarter, we expanded new products and incremental placement, even as consumer softness challenged sales and many of our key channels.
Speaker Change: This is a critical element of our strategy.
Speaker Change: As it layers on growth during short term periods of declining traffic in attendance.
Consumer trends improve we are well positioned across our segments to continue driving growth and profitability.
Speaker Change: Let's review, our three segments with a focus on the year's results and why we are confident in our ability to continue driving growth.
Speaker Change: In foodservice.
Speaker Change: <unk> sales grew <unk>, 3% for the fiscal year and two 4% on a normalized basis.
Speaker Change: This included growth of frozen novelties.
Speaker Change: Handhelds and bakery on both the reported and normalized basis.
Speaker Change: We did experience consumer softness in key channels in the fourth quarter, but consider these challenges to be short term in nature.
Do not expect that they will continue into fiscal 2025.
Speaker Change: Let me start with our frozen novelty business.
Speaker Change: Frozen novelty sales grew on both a reported and normalized basis for the year, Despite channel performance and amusement and convenience, which are key sales venues for <unk> dos <unk>.
Speaker Change: <unk> sales grew low single digits on a normalized basis for the year as new theater locations were offset by declines in traffic and attendance in our core convenience and amusement channels.
Speaker Change: This was more pronounced in our fourth quarter after delivering stronger sales in the prior third quarter.
As it relates to different dots.
We remain optimistic with our growth opportunities driven by added placements in theaters and indoor amusement together with expectations that business will improve and our core channels.
<unk> is currently in just under 900 theaters as of the end of fiscal 2024.
Speaker Change: And we expect to add another 120 locations in the first quarter and 180 locations in our fiscal second quarter.
We will then have <unk> available in the four largest theatre chain.
Speaker Change: AMC Cinemark.
Speaker Change: And markets.
Speaker Change: And the early feedback from some of our theater partners is that different dots is exceeding the sales of other frozen novelties.
Speaker Change: We are rolling out different dots, and all Dave and Busters and made event locations.
Speaker Change: We expect this rollout to be completed within our fiscal first quarter across roughly 220 locations.
Speaker Change: We have significant opportunities in the <unk> business, and we'll continue to expand placement and leverage innovation to add new flavors and packaging to drive growth.
Speaker Change: Taking a look at euros, we continue to be confident in our long term performance and growth opportunities.
Speaker Change: Sales growth for the full year was led by the addition of a major <unk> customer launched earlier in the year.
Speaker Change: This business provides other opportunities for growth with this customer.
Speaker Change: Looking forward, we are excited about a new opportunity to launch <unk> with a leading national Hamburger chain.
Speaker Change: This product was successfully introduced and our recent MTO and it exceeded expectations.
Speaker Change: We are working with the customer on next steps and new opportunities were.
Speaker Change: We're also working on working on <unk> with two additional major <unk> customers.
There's a lot going on with our <unk> business that provides us with added confidence in our ability to continue to grow this business.
Moving to bakery.
Speaker Change: We had a strong year in the bakery business led by expanded growth of cookies with both current and new customers.
Speaker Change: Our bakery team has a well thought out plan.
Speaker Change: To continue driving growth in 2025 that includes expanded production capacity new products.
Speaker Change: An incremental contract manufacturing opportunities.
Shifting to soft pretzels.
Speaker Change: Sales declined for the year driven by softness in the convenience theaters restaurants and amusement channels.
Speaker Change: This was pronounced throughout the entire market. However, we continue to grow our market share within the industry.
Speaker Change: We remain well positioned for growth as consumer trends improve and these key channels the.
Recently, we gained incremental placements a bavarian pretzel bites across all sectors of the foodservice industry.
Speaker Change: We will continue to drive incremental opportunities through new innovations like browse pretzels, and Bavarian pretzel sticks and bikes along with the expectations for improving channel performance of our core soft pretzel business.
Speaker Change: Moving to our retail segment.
Speaker Change: We grew reported sales two 7% and normalized sales four 4% for the fiscal year.
Speaker Change: This growth was driven primarily by continued expansion of our Super Pretzel, Bavarian sticks, and many pretzel dogs as a major customer continues to expand placements across their portfolio.
Speaker Change: We have talked about this business before as being a great example.
We're cross selling and leveraging our great brands across customer channels creates incremental opportunities.
Speaker Change: We have invested marketing dollars and trade funds to drive this growth and we'll continue building this brand across retail in 2025.
Speaker Change: Soft pretzel ACB grew over three points driven by expansion of Super Pretzel, Many pretzel dogs and Bavarian six.
Speaker Change: Our soft pretzel products are well positioned in the retail sector. Despite recent short term softness in the fourth quarter.
Speaker Change: Looking forward we.
Speaker Change: We expect distribution expansion across our Super Pretzel, and <unk> brands, and we will enter the premium Pretzel segment as we launch our brow house brand into retail.
Speaker Change: Let's talk about frozen novelty sales in retail.
Speaker Change: For both the year end the quarter sales declined on both a reported and normalized basis.
Speaker Change: This decline was primarily driven by softer sales in the <unk> in an overall declining Italian ice category.
Speaker Change: Our marketing and sales teams are focused on improved improving the weakest performance in 2025 through improved marketing programs and.
The enhanced consumer and product positioning and.
Speaker Change: An incremental customer opportunities.
Speaker Change: Our <unk> brand continues to perform well growing almost 20% in the quarter and adding over four points of ACB expansion.
Speaker Change: We can continue to see opportunities to build this brand leveraging the growing demand for pet products.
Speaker Change: We remain confident in this in this category and are really excited about bringing a new different dots retail product to the market in fiscal 2025.
Also we continue to grow our handheld business and retail sales for the year grew over 58% on both a reported and normalized basis. This is a strong business for us led by growth in incremental placements with a major mass merchant.
Speaker Change: Finally, let's discuss our frozen beverage segment.
Sales increased one 9% on a reported basis.
Speaker Change: And 3% on a normalized basis for the year.
Speaker Change: The ICT grew this business despite volume declines in our theater and convenience channels throughout most of the year.
Speaker Change: On a reported basis.
Speaker Change: Frozen beverage sales increased two 4% for the year, even lapping an extra week in fiscal 2023.
Speaker Change: Theaters are significant part of the IC business was down 5% compared to the prior year as the accurate strike impacted the volume and quality of movie releases.
Speaker Change: We did however, see improvement in the theater channel in Q4, especially in July and September as stronger releases hit the market.
Speaker Change: In talking with our largest theater customers.
Speaker Change: Industry expects significant improvement starting in our first quarter with a slate of franchise films and titles such as Wicked Gladiator too and Sonic the Hedgehog III.
Speaker Change: We see solid trends in the movie theater channel throughout fiscal 2025.
Moving movie slate and continuing strong concession consumption.
Speaker Change: Repair and maintenance and equipment sales increased on both a reported and normalized basis for the year.
Speaker Change: Continue to grow both of these categories led by expanded placements of ICEE machines, and incremental service business across our customer portfolio.
Speaker Change: We are excited about the prospect for IC and.
And as the theater business business comes back we are confident IC sales will as well.
Speaker Change: In short our strategies to leverage innovation and cross selling opportunities to expand placements of our core products and brands continued to deliver positive results.
Speaker Change: I'd like to take a moment to emphasize the impact of our operational investments over the past few years.
Speaker Change: Enhancements to our manufacturing and distribution capabilities are leading the notable improvements in key efficiency metrics.
Speaker Change: Our supply chain initiatives anchored by the three new RTC are working as planned.
Speaker Change: Adding new capacity and creating efficiencies and how we move products to our customers with.
Speaker Change: We now operate out of the nine cold storage facilities, simplifying logistics management across our network.
Speaker Change: Today, 90% of our sales orders are shipped from the new distribution network versus under 30% a year ago.
Speaker Change: With the average length of haul decreasing by over 30% and on time performance improving to over 80% versus 63% a year ago.
Speaker Change: Line haul cost per pound.
Speaker Change: Creased, 14% compared to the same quarter last year, and our snack food business.
Speaker Change: Shifting to operations.
Speaker Change: The combination of new lines and increased capacity in collaboration with new distribution centers have streamlined operations, leading to a reduction in waste and overtime.
This optimization has allowed us to enhance our service to customers more effectively than ever before notably fill rates have improved to 98, 7%.
Speaker Change: I also wanted to mention that we are far along on our CFO search and will be in a position to confirm a new hire shortly.
Speaker Change: As you know our current CFO, Ken <unk> will be retiring at the end of this calendar year.
Speaker Change: In summary.
We are pleased with the progress we are making to optimize sales across all customer channels and improve our operational efficiencies.
Our diverse portfolio of products and brands and our continued focus on innovation provides considerable growth opportunities across our customer base.
Speaker Change: Additionally, our strong balance sheet and liquidity along with our experienced leadership team.
Speaker Change: Reinforce our confidence in generating long term value for our employees partners and shareholders.
I am incredibly proud of our senior team and employees, who consistently carry out their jobs with dedication and skill set.
Speaker Change: Their commitment to our goals has led to strong results that reflect their hard work and collaboration.
Speaker Change: It's truly inspiring to see how each team member contributes to our success driving innovation and operational excellence together, we're building a strong foundation for future growth and success.
Speaker Change: As we enter fiscal 2025, we are optimist about optimistic about the growth potential of our core products and the success of our new product launches and client partnerships.
Speaker Change: We expect performance trends to improve in our core channels like convenience theaters.
Speaker Change: <unk> and restaurants, as consumer confidence and spending improves in fiscal 2025.
With a stronger film lineup ahead, we believe there'll be significant growth opportunities for different dots and IC and we anticipate improved sales across our other products as well.
Ken: With that I would now like to pass the call over to Ken to review, our financial performance in more detail Ken.
Ken: Thank you Dan and good morning, everyone I am pleased with our ability to deliver yet another record full year performance, even as many of our core customer channels faced a softer consumer environment.
Ken: As Dan stated we are executing a strategy that is working.
Ken: Confident our team is running the right place.
Speaker Change: I would like to take a few minutes to walk you through our fourth quarter and fiscal year results.
Before reviewing our results. It is important to note that J&J is fiscal 2023 fourth quarter and full year included an additional week with reported results compared with 14 weeks in the fourth quarter of fiscal 2023 and <unk>.
Speaker Change: <unk> 13 weeks in the fourth quarter of fiscal 2024.
Speaker Change: Likewise reported results include 53 weeks for the full year 2023 results compared to 52 weeks for fiscal 2024.
Speaker Change: For purposes of comparability, we refer to normalized sales more accurately explain performance trends.
Speaker Change: Looking at our fiscal fourth quarter results net sales decreased three 9% as reported and increased three 9%.
Speaker Change: On a normalized basis the loss of one week of sales had an even more pronounced impact on the quarter compared to the prior year due to losing selling days in the first week of our July fiscal month.
Speaker Change: These are peak seasonal sales days for our core business.
Speaker Change: We estimate this impact to be approximately $33 million when comparing fourth quarter results for fiscal 2004 to 2023.
Speaker Change: Reported net sales for the quarter totaled $426 8 million.
Speaker Change: For the fiscal year, we grew sales, 1% on a reported basis and added $15 9 million in incremental sales despite having one less week.
Speaker Change: Net sales grew an estimated two 8% comparing results on a normalized basis.
Speaker Change: I'll spend a few minutes reviewing fourth quarter results for each of our segments.
Speaker Change: Foodservice, our largest segment saw reported sales decreased 3% to $262 2 million during the fourth quarter compared to the prior year period.
Sure and soft pretzel sales declined nine 5% and 94% respectfully.
Speaker Change: Frozen novelty sales declined four 3%.
Speaker Change: This was partially offset by a three 5% increase in bakery sales to just shy of $100 million.
Speaker Change: And an eight 4% increase in handheld sales.
Speaker Change: The sales decline across most categories was attributed to the one less week this quarter.
Speaker Change: And softer consumer spending in key channels like convenience amusement and restaurants.
Speaker Change: Sales on a normalized basis increased an estimated four 6%.
Speaker Change: Sales of new products and added placement with new customers total approximately $8 million driven primarily by the addition of <unk> to the menu of two major <unk> customers.
Speaker Change: This led to fourth quarter operating income in the foodservice sector of $15 3 million a decrease of 12, 7% versus the prior year period.
Speaker Change: Reflecting lower overall food service sales a less favorable sales mix.
And production and supply chain efficiencies as we manage through the softer consumer demand.
Speaker Change: Moving to retail.
Speaker Change: Q4, 24 reported net sales totaled $55 9 million or a decrease of 13, 7%.
Speaker Change: Driven by <unk> 19.
Speaker Change: Driven by 19, 3% and 16, 8% declines in soft pretzels and frozen novelties respectful.
Speaker Change: This was partially offset by relatively flat biscuit sales.
Speaker Change: 14, 9% increase in handheld cell.
Speaker Change: Expanded product placement with a major mass merchant.
Speaker Change: Normalized sales decreased an estimated five 7% as consumers tightened spending.
Speaker Change: Grocery and mass merchant retailers.
Speaker Change: We continue to see pressure on discretionary spending for long term food inflation impacts.
Speaker Change: Higher interest rates.
Speaker Change: <unk> credit card balances and overall economic concerns.
This led to an operating income of $3 $3 million, a decrease of 400 400000 versus the prior year period, reflecting the drop in sales.
Speaker Change: As it relates to our third segment frozen beverages reported sales were $108 7 million.
Speaker Change: A 1% decrease compared to a record Q4 'twenty three.
Speaker Change: Overall segment sales increased an estimated seven 7% on a normalized basis.
Speaker Change: Beverage sales were flat at $71 3 million, but did increase on a normalized.
Speaker Change: Comparison led by improvements in theater, so, especially in July and September as the volume and quality of our releases started to recover from last year's actors strike.
Speaker Change: Overall gallons sold increased an estimated 7% when adjusted for the extra week.
As Dan mentioned, we expect volumes to experience a significant improvement in calendar year 2025, given the stronger schedule of film releases.
Speaker Change: Repair and maintenance revenues declined one 3% versus the prior year period, reflecting the impact of one less week, while machine sales were up one 7% in the quarter.
Speaker Change: This led to a Q4 2020 for operating income increase of three 4%.
Speaker Change: The $21 3 million for the quarter compared to Q4 dollars 23 operating income of $26 million.
This was driven by improved product mix and effective management of operating expenses.
Speaker Change: So for moving on I would like to point out that on a full year basis.
Speaker Change: All three segments experienced growth, including 3% increase in foodservice.
Speaker Change: 7% in retail and a one 9% increase in food and beverage sales.
Speaker Change: Adjusting for the additional week in fiscal 2023, we estimate that normalized sales increased two 4%.
Speaker Change: Four 4% and 3% respectfully for the foodservice retail and frozen beverages segments.
Speaker Change: Our investments and initiatives in the last few years to enhance profit margins and drive efficiency across our business are proving to be successful.
Speaker Change: For the year, we continued to deliver on our goal of improving gross profit in fiscal 2024 gross profit increased three 5% to $486 1 million, leading to a gross margin rate improvement of 80 basis points.
Speaker Change: To 39%.
Due to the previously mentioned impacts our fourth quarter gross profit declined 7% to $135 5 million, leading to a gross margin rate of 31, 8%.
Speaker Change: Compared to 32, 8% in Q4 2023.
Speaker Change: We remain confident in our ability to deliver strong and consistent profit growth and expect to further improve our gross margin rate in 2025.
Speaker Change: And as it relates to inflation across our portfolio of raw materials, we experienced net mid single digit inflation with the increase primarily driven by higher cost of cocoa chocolate and to a lesser extent increases in the cost of sugar eggs and needs.
These increases were somewhat offset by slight deflationary trends seen in flower cheese and dairy and mixes.
Pricing adjustments at contractual cost true ups to help minimize the majority of the impact.
But continued inflation in chocolate and sugar is driving consideration of further price increases and cost of goods initiatives to manage gross margins.
Speaker Change: Our procurement team continues to effectively manage supply and cost and we are well positioned to respond to any impacts.
Speaker Change: Looking at expenses total operating expenses decreased $8 $4 million or 8%, representing 22, 4% of sales for the quarter compared to 23, 4% of sales in the prior year period.
Distribution costs were 10, 8% of sales in the quarter flat compared to the prior year period as the investments we made to.
Speaker Change: Due to increased efficiency across our distribution network and supply chain and continue to drive expense savings.
Speaker Change: Marketing and selling expenses for the quarter were seven 3% of sales versus 7% in the prior year period, as we continued to invest in our product innovation brand promotions and new selling opportunities.
Speaker Change: Administrative expenses were four 3% sales in Q4 24 compared to 5%.
Speaker Change: In 2023.
Speaker Change: This led to an operating income of $39 8 million for the quarter or a four 5% decrease compared to $41 7 million in Q4 of 23.
Speaker Change: Adjusted operating income was $42 million in the fourth quarter or an eight 3% decrease.
Speaker Change: Compared to Q4 'twenty three.
Speaker Change: We estimate the additional week negatively impacted operating profit for the quarter by approximately $4 million.
Speaker Change: On a four on a full year basis operating income increased seven 3%.
Speaker Change: $117 5 million.
Speaker Change: Adjusted operating income grew eight 5% to $134 million.
Speaker Change: After the impact of income taxes of $10 9 million compared to $11 $3 million in the comparable prior year net earnings for the fourth quarter decreased two 6% to $29 6 million, resulting in earnings per diluted share of $1 52.
Speaker Change: I'm here to $1 57 in the prior year period.
Adjusted earnings per diluted share were $1 60 for the quarter compared to $1 73 in the prior year period.
Speaker Change: And on a full year basis net earnings increased nine 7% leading to diluted earnings per share of $4 45.
Speaker Change: Versus $4 eight.
Speaker Change: In fiscal 2023.
This resulted in full year fiscal 2024 adjusted earnings per diluted share of $4 93 versus $4 50 in fiscal 2023.
Speaker Change: Adjusted EBITDA for the fourth quarter decreased 4%.
Speaker Change: $59 7 million from $62 2 million in the prior year period, and our effective tax rate was 26, 8% in the quarter.
On a full year basis, adjusted EBITDA increased 10, 2% to a record 200.
Speaker Change: $1 million.
Looking at our liquidity position, we continue to maintain a healthy balance sheet and overall strong liquidity position with $73 4 million in cash and no debt.
Speaker Change: Our ability to improve cash flow the working capital initiatives and stronger profitability is generating more cash to pay down debt pay dividends and continue investing in our business.
Speaker Change: Our focus will continue to be on maintaining a healthy balance sheet and prudent leverage position, which enables us to continue investing in the growth of our business and returning value to our shareholders in.
Speaker Change: In addition, we have ample availability under our revolver of over $210 million in additional borrowing capacity.
Speaker Change: To summarize we continue to see momentum in our business supported by the breadth of our portfolio on brands the strength of our balance sheet.
Speaker Change: And the improvements we continue to make across our operations.
Speaker Change: Before I turn the call over to the operator I wanted to thank Dan Our board of directors and every member of the J&J team for their unwavering support during my time as CFO.
J&J is truly an exceptional company very much enjoyed my time here.
Speaker Change: As Dan mentioned, we are close to announcing my replacement and I look forward to helping insurance smooth and seamless transition.
Speaker Change: I would now like to turn the call over to the operator for questions and answers.
Speaker Change: Thank you if you'd like to ask a question. Please press star one one.
Speaker Change: Your question has been answered and you'd like to remove yourself from the queue. Please press star one again.
Speaker Change: Our first question comes from Connor Rattigan with consumer edge. Your line is open.
Connor Rattigan: Good morning, guys. Thanks for the question.
Speaker Change: Good morning, good morning.
Speaker Change: Good morning, So Dan you called out challenged traffic and software consumption across the channel.
Speaker Change: <unk> retail C store and so I understand traffic is probably under pressure, but I guess could you maybe kind of comment maybe where youre seeing the greatest pressure and kind of help us understand the magnitude of that traffic pressure and also you also had noted that you don't really expect that to continue into 2025.
Speaker Change: I guess, just kind of given the backdrop across the sector and what really gives you the confidence is pressure bolt process into 2025.
Speaker Change: Yeah, Great question Connor.
A couple of the areas that we saw declines in really all year long both the theater and the convenience sector are one debt that I believe, especially the theater have a chance to really bounce back strong for this coming year.
Speaker Change: And Thats part of what gives me confidence that there is a period of time that we've gone through.
Speaker Change: Debt.
Speaker Change: That may be has a reason to be hopeful for the future right. There is some great new movie releases coming out even as we closed the end of this year and then if you look at their lineup into 2025 and really even into 2026 it.
It gives you. It gives you the great hope that those sales will return pretty pretty rapidly a couple of the other areas that we talk about the restaurants and the <unk> being down throughout this period of time, we know that that the <unk>.
Speaker Change: Consumer has been stretched.
Speaker Change: And spending has been down and you heard me talk throughout the year or even even I think you specifically asked me what some of my concerns were throughout 2025, our 2020, barring and I said as we get closer into the election period I was worried about how the consumer micro react during that time theres a lot of publicity going out there.
Speaker Change: And people feel one way or the other and they are just an uneasiness as you go through it I felt that myself and regardless of who wins and what party wins once you come through that there is.
Speaker Change: The American people, who are just so resilience that I believe will have a stronger feel for our economy. As we go forward I think we're starting to even fill some of that today right and so I'm hopeful as we move into 2025 that we will see a lot of those pressures.
Speaker Change: Side, it doesn't happen overnight, but it does happen over a period of time and as we get through our first quarter and into the rest of the year.
Speaker Change: We feel pretty hopeful with all of the things that we have going on both in operational efficiencies and some of the great new pieces of business.
Speaker Change: Pipeline that I see from each business unit that we can see a really nice 2025.
Speaker Change: Alright, great that was really helpful.
And then just one more so on the margin component so you called out.
About some margin pressure given the fortunately compare with I believe it was a $4 million operating income headwind.
Speaker Change: So correct me, if I'm wrong, but it seems like the entirety of that $4 million operating net operating income headwinds and put the gross margin pressure.
Speaker Change: Could you just maybe elaborate a little bit on that on the mixed headwind you called out just maybe why that was so significant or was there maybe some incremental inflation of our promotional posture that popped up in the quarter.
Speaker Change: Yeah. Conor this is Ken Thanks for your question yes.
Speaker Change: Yes, it's kind of a combination of a lot of things being one the loss of that key weak and again, we wanted to call out that that was the first week of June.
Speaker Change: <unk> fiscal month that we lost.
Speaker Change: That is a period of time, where our core products pretzels.
Speaker Change: <unk> Ics dip and died.
Speaker Change: Really sell in high volume and those are some of our strongest margin product.
Speaker Change: So because it was that week that drove especially pronounced impact.
Speaker Change: On margin.
Speaker Change: On the operating income.
Conor Rattigan: The impact that we estimated a $4 million the other thing as they looked into the quarter Conor and you see the degree of.
Conor Rattigan: Sales declined in some of those core areas combined with increases in areas like bakery.
Handhelds and a few others the combination of some of those lower margin areas growing in the higher margins declining.
We estimate probably add around <unk>.
Conor Rattigan: 80 basis point impact on margin rate in the quarter just from that change in mix.
Conor Rattigan: Those core items I'm speaking remember they are predominantly sold in.
Conor Rattigan: And amusement and restaurants.
Conor Rattigan: <unk>.
Conor Rattigan: And those channels that we spoke about that are soft and.
Conor Rattigan: You can read on many of those customers that we serve it recently come out and all of those industries and channels talking about softer traffic, particularly in Q4.
Thank you. Our next question comes from Andrew Wolf with C. L. King Your line is open.
Andrew Wolf: Thanks, Good morning, and Ken Congratulations on everything and have a great.
Speaker Change: Post J&J.
Andrew Wolf: Retirement, and whatever else you Dear Thank you Andrew.
Andrew Wolf: Most welcome.
Speaker Change: I wanted to kind of follow up on the last question.
Speaker Change: So just from the outside it looks to me like.
Speaker Change: <unk>.
Speaker Change: Deleveraging and kind of missing your earnings.
<unk> clearly the foodservice part seems to be where the problems were and you just spelled out a big mix change.
Speaker Change: Can you unpack the rest of that because the press release.
Referenced in you guys.
Speaker Change: I think a little more than you have been talking about.
Speaker Change: Inefficiencies in production.
Speaker Change: And even supply chain. So I know when there is unexpected demand shifts either way, but particularly down.
Speaker Change: Labor rates are going to go the wrong way and so on but.
Speaker Change: Was there anything unusual or is it mainly just that plus the lack of absorption of the overhead.
Speaker Change: You summed it up well actually Andrew is a combination of all of those things so.
Speaker Change: Distribution expenses rough numbers here, but around 20% of those expenses are fixed, particularly as we've gotten into these three rbcs that are driving all the efficiencies that we talked about.
The cost of those on a fixed basis.
Speaker Change: More and so when sales are down then.
Speaker Change: And then that's going to that's not going to leverage as well that was part of the impact it's why I'm actually quite proud.
Speaker Change: We came in flat with a year ago, given the sales difference in them.
Speaker Change: Dollar basis.
Speaker Change: We came in I don't want to say two years or $3 million less than a year ago and distribution expenses.
Speaker Change: So we still manage it well and Dan spoke to a lot of those metrics.
Speaker Change: But when we have the sales come down this core areas and start to deleverage fixed expenses trade.
Speaker Change: Trade stat margin.
Speaker Change: The challenge that was really a byproduct.
And it was both in distribution and.
Speaker Change: And then it was also and plant absorption because.
Speaker Change: As we we have built up inventory, we started to see consumption declines we ended up having to pull back on production.
Speaker Change: Kind of manage position that.
Speaker Change: And because of that there is less absorption in that contributed.
Speaker Change: To this mix challenge.
Speaker Change: That I mentioned in the end, the 100 basis points lower margin than a year ago.
Speaker Change: Okay, and just kind of related to that.
Speaker Change: Is there anything you demand planning that.
Speaker Change: AI or machine learning any way to like get that so you can actually predict as.
Speaker Change: Previously unpredictable shifts in demand better or is it just essentially.
Speaker Change: Yes.
Speaker Change: It's a great question and I hope it will change, but it is a great question and whenever you go through a quarter.
Speaker Change: We've asked those questions as well.
Speaker Change: And Ken and I have sat down with the teams there.
Speaker Change: To really understand exactly how we how we go about demand planning and how that circulates within our organization.
Speaker Change: I always think there is opportunities for improvement.
Speaker Change: The team is doing really really well, but im asking those same questions and our goal would absolutely to be better at that in the future like a lot of areas that we improved on our transformation and I think thats one of those areas that we can continue to look at and become better at.
Speaker Change: Yes, and I would add Andrew.
Andrew Wolf: The quarter started out well we had a good July.
Andrew Wolf: And really it was in August and September.
Dan and I attribute that a lot to the things that he summarized a few minutes ago.
Andrew Wolf: And that yes, the combination of probably uncertainty around the election with some trends already negative in many of these channels as discretionary spending was tightening up.
Andrew Wolf: And then the other thing we did mentioned in the script, we don't have the measure of it it would be hard pressed to measure is the timing of the two hurricanes that came to Florida and southeast.
Andrew Wolf: Florida is obviously, a big big state.
Andrew Wolf: Terms of outdoor amusement that sort of thing.
Speaker Change: With that played a role I suspect.
Speaker Change: Some of the declines that we weren't necessarily anticipating coming out of July and then all of a sudden start to play out in August and September.
Yes.
Speaker Change: Yes, there was.
Speaker Change: One of the big.
Speaker Change: Foodservice distributors trying to quantify it it was pretty big impact for them at least right.
Speaker Change: Lastly, I don't want it.
Speaker Change: I'll cede I just wanted to ask a specific thing because you covered a lot of your innovation, but did you mention or could you update us if you Didnt mentioned it or if you did just repeat it.
Speaker Change: Are you still doing a frozen beverage test <unk> and <unk>.
Speaker Change: Sure.
Speaker Change: We are continuing to grow I did not mention it but it is continuing to grow and we've now rolled out.
Speaker Change: In addition, our market down in Florida with it and so we remain hopeful that this is something that we can bring in during the 2025 years.
Speaker Change: Okay, Great Alright. Thank you. Thank you Andrew Andrew.
Speaker Change: Thank you as a reminder, if you'd like to ask a question. Please press star one one.
And our next question comes from Todd Brooks with Benchmark Company. Your line is open.
Todd Brooks: Hey, Thank you good morning, gentlemen, and can try not to play too much golf okay.
Speaker Change: Thank you John.
First question I have for you and then it gets to just the timing of this call and looking forward.
Fiscal 'twenty five you've had a nice track record here of gross margin improvement we've talked about.
Speaker Change: More of a medium term target of getting to the mid Thirty's with gross margin and you pointed to in the call.
Speaker Change: Expecting improvement fiscal 'twenty five over 24 distribution, you talked about kind of a 10% goal, maybe levering a little bit beyond that as time goes on.
Speaker Change: Can you talk about margin framework looking forward into 'twenty five knowing that.
Speaker Change: Youre hopeful on the consumer bouncing back but.
Speaker Change: Within the controllable elements of the business.
Speaker Change: We try to level set expectations from our standpoint for margin improvement that you're expecting to unlock in the upcoming year.
Speaker Change: Yeah, absolutely and great question.
Speaker Change: The reason why we spent a lot of time and Dan's comments about really talking about the strategies and the financial strategies of improving gross margin.
Speaker Change: And we did it last year, we did it this year, that's very important to us growing profits faster than sales are.
Speaker Change: Our plan for next year is to continue to do the same.
We would expect gross margin to.
Speaker Change: To improve I think its safe to say, we expect it to be over 31%, which should show improvement over the.
38% for the year this year.
Speaker Change: I think Dan mentioned this in our call last quarter. The next mile gets harder right.
Speaker Change: A lot more work to do to continue filling out our way.
Speaker Change: To 32 and beyond but that is the goal and we think we will get there.
Speaker Change: We'll get there next year I would probably.
Speaker Change: Be thinking in the kind of low 31% range kind of area for 25, but but the focus is there. The initiatives are there we went through in our planning recently and they are very specific initiatives, whether it's procurement, whether it's operational efficiency.
Speaker Change: There its distribution how do we get that number is starting to hit its way.
Speaker Change: Towards that.
Speaker Change: Low 10% range all of those things are very specific initiatives and continue to be the focus.
Speaker Change: Todd I'll, just echo on that book.
Speaker Change: Bullish as ever before.
Speaker Change: Going to continue to drive that as much as we possibly can and just like Ken said I'd say it all the time the last mile is the hardest, but we're going to continue to work hard in that last mile and the teams continue to be focused around it and so I think we can continue to move it I think Tim gave you a number that's probably fairly accurate for next year and then we'll continue.
Speaker Change: To get it better the year after as well.
Speaker Change: And just a follow up on that if I can.
Speaker Change: The distribution with all three of the RTC is now set up and really running 90% of the products like you said through there.
Speaker Change: Is that is that 10% goal deliverable in fiscal 'twenty five to meet or beat that number.
Speaker Change: Probably not for the year Todd.
Speaker Change: <unk>.
Youll see us getting in that range I think in Q3 and Q4 when the sales.
Speaker Change: Our up there.
They want us to get there.
Speaker Change: Given the seasonality of many products and the level of fixed cost in that.
Speaker Change: We won't hit that market in Q1 or even in Q2, so that it'll average out.
Speaker Change: Probably something closer in.
Speaker Change: Mid teens somewhere I would probably say Todd.
Speaker Change: Okay perfect. Thanks, and then.
Speaker Change: I mean to be clear mid tens.
Sorry, the mid <unk>.
Speaker Change: 10% range is what I was trying to say.
Speaker Change: Gotcha and then.
Speaker Change: Our final question from me.
Speaker Change: Product newness not as much focused on that on the call because we have to explain just kind of the lapsed with the 50 <unk> week here.
Speaker Change: I know, you've just announced for the upcoming <unk>.
Speaker Change: Launch in grocery.
At retail with Kroger.
Speaker Change: You talked about expanded placement all four theater channels, Dave and Busters, which was incremental news, okay, and you talked about the ability to double this business relative to that $80 million run rate. When you bought it are you more bullish on the outlook now as youre seeing the expansion through additional channels.
Speaker Change: With the core product, but also opening up the retail channel here early in calendar 'twenty five.
Speaker Change: We're really excited about that retail thing, we believe different dots in retail can be really really big for us and.
Speaker Change: And early indications from talking.
Speaker Change: Our customer not the consumer but talking to our customer they are equally as excited.
Speaker Change: We feel really good about that and we think we have a potential product to back it up with are coming out of <unk> as well and so I love the momentum that our teams are working on.
Speaker Change: And how they see being able to expand that I still am bullish that we can double those sales now they may show up in our P&L. Some in retail on some of the foodservice because of the way we report it but.
Speaker Change: I still believe that we can do that.
Speaker Change: And I love that acquisition and if we were calling out some of the new items coming out that would be top the list I really like what we're doing with that I would also like I mentioned, our brow house into retail.
Speaker Change: I think that's going to do really really well for us the team is kind of positioned this.
Speaker Change: Good better best kind of profile around our J&J snack foods pretzel and are Andy and spreads on this brow house Pretzel and I think we're I think we're entering into a really nice market there as well and then it continued expansion with doctors.
Speaker Change: Today, we have.
Speaker Change: New flavor that we introduced last year and we're looking at how to introduce that in single served to entered into the the pet industry as well just see some really good things across all of our business units with great opportunities even mentioned in the call just to call. This out to the an opportunity that we have with contract.
Factoring because it's something that we don't always talk about but we have a really nice opportunity. There. So a lot of really good tailwind going into the year.
Speaker Change: Okay, great. Thank you both thank.
Donna: Thank you Donna.
Speaker Change: Thank you.
Speaker Change: Our next question comes from Jon Andersen with William Blair. Your line is open.
Speaker Change: Hey, good morning, Dan and Ken Thanks for the question good morning, John.
Speaker Change: Maybe just to kind of try and close the loop a little bit.
Speaker Change: One of the questions.
Speaker Change: From the last.
Speaker Change: Participants.
Speaker Change: You addressed.
Speaker Change: Kind of how youre thinking about gross margin.
Speaker Change: In 2025.
Speaker Change: The distribution ratio.
Speaker Change: I wanted to hit a different line the marketing line.
Speaker Change: Yes, there were a couple of years in 2020 one.
Speaker Change: The marketing ratio came down I think thats.
Speaker Change: Quite understandable given what was happening at that time.
Speaker Change: It's crept up a little bit in 'twenty, three and 'twenty four.
Speaker Change: We ended the year this year at about seven 4% of sales, but still below where it was several years ago.
Speaker Change: Closer to eight to nine.
Speaker Change: Dan you mentioned some investments there.
Mo.
Speaker Change: <unk> behind the retail part of the business, how do you see that line.
Speaker Change: Evolving over the next year or two.
Speaker Change: As you expand particularly some of the new products different thats et cetera into retail.
Speaker Change: Yeah. Good question, John Im really proud of that marketing team of ours led by languid Mallard and some really really good people within there.
And cost conscious at all the times and so I wouldn't I would first answer the question as I see that marketing line being basically flat to that seven 4% range somewhere in there. During this next year. The teams are evaluating how they spend that all the time.
Speaker Change: And.
Speaker Change: And may be diverting it into some more digital and more focused marketing.
Speaker Change: In different ways and NOI Calvert, we have that lined up for next year, but I would I would see it in that.
Same flattish range to that seven 4%.
Speaker Change: Great that's helpful.
Speaker Change: Okay. So I wanted to shift to the top line for a minute.
Speaker Change: You did talk quite a bit about.
Speaker Change: Okay.
Some of the pressure on the consumer or softer traffic of late and I guess some of that throughout the year in certain channels.
Speaker Change: When I step back and I think about hey on a normalized basis, you grew sales about 3% this year and even in this quarter.
Normalized you grew sales at 4% or nearly 4%.
Speaker Change: Which is pretty good and so.
Speaker Change: Im trying to cut it.
Speaker Change: Taking that kind of view and then some of the commentary around.
Speaker Change: Youre thinking that.
Speaker Change: Cross selling efforts are taking hold the consumers likely to come back stronger in the theater channel of improving.
Speaker Change: What what should we be kind of be thinking about for fiscal 'twenty five in terms of normalized growth at this point, how would you kind of at least give us some guardrails to work with as we think about modeling the top line going forward.
Speaker Change: Hey, Thanks for calling some of those things out Thats exactly what I was trying to get across on the call. We're really proud of the year that we've had right, especially if you back out some of the muddy notice of an extra week.
Speaker Change: And last year compared to this year.
Speaker Change: Love what the teams are doing to grow that.
Speaker Change: Falls in line with some of the things that you've heard me say before and I really believe that the J&J company has is.
Broad diverse portfolio, which allows us to be what I call kind of recession resilient not recession proof that doesn't mean that we don't win in down periods of time, we don't get affected some but we have such a broad.
Speaker Change: Portfolio that we have some recession proof to that or downtime proof.
Speaker Change: Our goals continue to be that mid single digit growth year end and year out right and as I look into probably 2025 I would see it in that low mid single digits growth somewhere in that range probably is how we're looking at it going forward. We think we have some really nice opportunities in.
Speaker Change: We believe that the industry and channels will improve.
Speaker Change: And those combinations I think should get us somewhere in that.
Speaker Change: Mid to low single digits.
Speaker Change: And I think.
Speaker Change: There was at least.
Speaker Change: A comment in the prepared remarks around some inflation, maybe it was cocoa sugar for.
Speaker Change: Perhaps prompting you to look at some additional price I think you usually take price late in the year to effective in the new calendar year as that part is pricing part of the algorithm in 2025 or not at this point.
Speaker Change: It is and we will be taken pricing on what I call. The three business units IC snack foods and different dots in the January timeframe IC has that cadence that they always are on and they'll do that January 1st and different doctors kind of now on that cadence as well and then some.
Speaker Change: We're mid January we will have an increase in the snack food side as well.
Speaker Change: That's helpful last one for me.
Your Capex was down 30% or so this year I think that's because there were some.
Speaker Change: So some larger investments obviously, you are making in operational efficiencies infrastructure I think in 'twenty three that didn't have to repeat in 'twenty four but how should we think about capital.
Expenditure in 2025 maintenance and growth.
Speaker Change: Yes that would be helpful. Thanks.
Speaker Change: Yes, John scan you summarized that well 'twenty two 'twenty three big investment years as we.
Speaker Change: We've talked about the six lines in <unk> et cetera.
Speaker Change: And now I think we're back to a bit more normal state I mean, we will continue to invest in our business are still.
Speaker Change: Let's say two to three four.
Speaker Change: Lines that we may add or improve next year.
Speaker Change: The capital, but I think the way to think about it in 2005 and going forward is it's going to be kind of a run rate of around four 5% 5% of sales.
Speaker Change: So that would put you kind of in a range of $75 million to $85 million probably in the.
Speaker Change: Near future somewhere in there.
Speaker Change: Great. Thanks, so much and Ken good luck going forward. Thank.
Speaker Change: Thank you John.
Speaker Change: Thanks, John.
Speaker Change: Thank you. Our next question comes from Rob Dickerson with Jefferies. Your line is open.
Speaker Change: Great Alright.
Yes, I guess.
Speaker Change: Two questions for me first question is just okay.
Excuse me.
Speaker Change: Yeah.
It's kind of going back to the channel dynamics in consumer discretionary spend all that fun stuff so far.
Speaker Change: <unk>.
Speaker Change: No.
Speaker Change: You clearly have a better view.
Speaker Change: What's been occurring in the.
Speaker Change: Then the convenience store channel, where you do have some exposure.
Speaker Change: And clearly the channel it's been under pressure.
Speaker Change: Recently.
Speaker Change: I walked into a number of convenient stores I actually see some actually see some promotions and C stores, which we normally don't see.
Speaker Change: <unk>.
Speaker Change: And I've been talking to a few people, who say Oh you know.
Speaker Change: Yes, I mean really have expectations and hope that the C store channel kind of comes back as we get through.
Speaker Change: Next year.
Speaker Change: While I understand your comments on the on the movie.
Speaker Change: Channel.
Speaker Change: Film releases.
Speaker Change: Kind of whatever you have.
Speaker Change: You can think about like what like what could actually entice kind of the average person who would normally have gone to a C store to kind of go back to that C store.
Speaker Change: Because I do think that is kind of like a decent kind of benchmark as to where maybe some of the discretionary spend moves.
Speaker Change: Consumers overall.
Speaker Change: Think about shopping that that channel.
Speaker Change: Those more discretionary channels.
Speaker Change: And in your products.
Speaker Change: Kind of preface it all with like I realize theres, an election, and things are choppy and consumer, but that's kind of taken a gas.
Speaker Change: Like what what could get people back there.
Speaker Change: Have a very broad first question.
Yeah.
Speaker Change: You know that convenient channel are interesting because I've watched it really closely to it affects a lot of pieces of our business on the snack food side on the IC side and on the <unk> side. All three of those are impacted by what happened there.
Speaker Change: And so I think you brought up some promotional activity and we're looking at that really strong we're looking at marketing efforts that Paul.
Speaker Change: Full of consumers as they are out in the car and entice them to.
Speaker Change: Products that we have inside the store, which are highly impulse items often there.
Speaker Change: And and I don't know if there is a <unk>.
Silver bullet debt pools that industry back and overnight, but I think a greater consumer confidence will allow some additional spending.
Speaker Change: For people to get out of their car and out of the gas pump area and into the convenience store to buy one of our core products and so sometimes that you've heard me say this before and we've really been doing it in the theatres as well with <unk>, sometimes the best way, our best time to invest in a particular channel unless you have a lot of base and that will come back.
Speaker Change: Is when it's a little soft right and so.
Speaker Change: Working really hard at that and continuing to grow.
Speaker Change: And several of our areas in that channel we were just out.
Speaker Change: National Association of convenience stores show.
And had some good opportunities come out of that we're going to continue to grow in it and are confident that it will come back they come back.
Speaker Change: In Q1, or Q2, I am not sure, but but we're going to do that and we're going to drive some promotional and marketing activity to try to pull the consumer insight as they are to their smart smart operators and they're working hard at it as well.
Speaker Change: Yes.
Kind of thinking like Youre, introducing <unk> site and drive somewhere theres like signage everywhere and did a little Johnny and the cars like Hey, Mommy can I.
Speaker Change: We stopped by sellout tours out like.
Speaker Change: Like why not put out different dot signage or sale its special icy day for $3 for large size.
Speaker Change: Assuming their ideas out there.
Speaker Change: <unk> made a little bit versus just like hey, hopefully.
Speaker Change: Consumer gets better.
Speaker Change: I agree Rob that's exactly what I'm, what I'm, saying, we'd call it Caribbean marketing.
When youre driving up to that convenience store you start to recognize some of those products that are out there right now I see over the years has done that curve and marketing really well and we're going to leverage some of those learnings.
Speaker Change: There are other pieces of business.
Speaker Change: Fair enough fair enough, Okay, and then just.
Speaker Change: Quickly.
Speaker Change: There's been a lot of great.
Speaker Change: Supply chain network optimization moves over the past couple of years.
Speaker Change: Along with the Capex that you expect to do it.
Yes, I mean, I realize is a little softer now lapping the extra week.
Speaker Change: But kind of like and then also the comments around.
Gross.
Speaker Change: Arjun expansion right some next year.
But.
And kind of far.
Speaker Change: And the mileage of that gross margin.
Speaker Change: But there was still kind of like a like a longer term expectation that.
Speaker Change: You can get that operating profit margin.
Speaker Change: <unk> over time because of the initiatives.
Speaker Change: And then obviously some consumer tailwind would help too.
Speaker Change: Alright.
Speaker Change: If we're thinking three years forward was there is there anything that's.
Speaker Change: <unk> necessarily changed or no like the environment has changed a little bit but environment coming back and we're back on track and we'll be able to leverage some of our SG&A and distribution costs and what have you. So again kind of a broad question, but just curious I know Rob nothing has really changed on our initiatives to continue to drive those to the.
Speaker Change: Levels that we've talked about it other than what I've said before.
Speaker Change: For a period of time in my life I ran a bunch of half marathons and it would be very ever and a half or a pool. When you hear me say that last mile is the hardest. It really is the hardest it seems like it takes you the whole marathon to get to that last mile right.
Speaker Change: And so those are the things that we're up against we will continue to grow margins 30, plus.
Speaker Change: With the goal of someday, hoping to be in the mid <unk> with that we will continue to drive that through the things that we do each and every day and the same thing with supply chain met with that team and our loved the work that they've done.
Speaker Change: Met with that team just a couple of weeks ago.
Talk about okay. So now how do we take the next really big step.
Speaker Change: And the team has some great plans in it and I'm sure that they will execute on it but those plans as we get to this stage.
Speaker Change: Our harder right when you get the last mile. It's just harder our goals haven't changed.
Speaker Change: The initiatives haven't changed I believe that we will get there just gets tougher as you get deeper into it.
Speaker Change: Yes, yes, Rob, but I'll, just just to add emphasis to what Dan said, because I mean, we talk about this every day every meeting every quarter. These are real.
Speaker Change: Parts of the strategy.
Speaker Change: The proof is in what we've done so we improved EBITDA margin adjusted EBITDA margin year over year by 110 basis points that was driven by the 80 basis points improvement.
Speaker Change: Gross profit and then the other part primarily probably distribution expenses.
Speaker Change: Even in the fourth quarter.
Speaker Change: Take out the impact of the extra week, we would've came in around 15% EBITDA as it relates to sell so yes, we are hitting the mark there.
Speaker Change: Going to be harder to get the next 100 and the next hundred but I think as long as those are core strategies and how we do things and how we drive performance.
Speaker Change: The business is again to continue to move those numbers up.
Speaker Change: Thank you there are no further questions at this time I'd like to turn the call back over to Dan fastener for any closing remarks.
Dan Fassler: Thank you very much in closing we are successfully executing our strategy and an ever evolving operating environment and we are confident in our ability to deliver our objectives in 2025 and over the long term.
Also want to take this opportunity to thank Ken for being such a great partner and leader and his valuable work in transforming the business over these past four years, everyone at J&J wishes him and his family the very best in this new chapter of his life.
Look forward to updating you on our fiscal 2025 first quarter results in the interim should you have any questions or wish to speak to US. Please contact our investor relations firm <unk> at 202, <unk> hundred 58500.
Dan Fassler: And have a great day.
Speaker Change: Thank you for your participation. This does conclude the program you may now disconnect.
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