Q1 2025 Lancaster Colony Corp Earnings Call

October 31, 2024

and

Gerald: Good morning. My name is Gerald and I will be your conference call facilitated today. At this time, I would like to welcome everyone to the Lancaster Collinique Corporation fiscal year 2025 first quarter conference call.

Conducting today's call will be Dave Sonsky, President and CEO, and Tom Pigott, CFO, all lines have been placed on mute to prevent any background noise.

After the speakers have completed their prepared remarks, there will be a question and answer period.

If you'd like to ask a question during this time, simply press star 1-1 on your telephone keypad.

Speaker Change: If you'd like to withdraw your question, press star one one again. Thank you. And now to begin the conference call, here is Dale Ganobsik, a Vice President of Corporate Finance and Investor Relations for Lancaster Colonial Corporation. The floor is yours.

Dale Ganobsik: Good morning everyone and thank you for joining us today for Lancaster College, this school year 2025, first quarter conference call.

Our discussion this morning may include further working statements which are subject to the safe harbor provisions of the private security's litigation reform act of 1995.

These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially. In the company undertakes no obligation to update these statements based upon sub-squint events.

A detailed discussion of these risks and uncertainties is contained in the company's colleagues with the FCC.

Dale Ganobsik: Also note that the audio replay of this call will be archived and available at our company's website, LancasterColonit.com, later this afternoon.

For today's call, Dave Ciesinski, our president and CEO will begin with a business update in the highlights for the quarter.

Dale Ganobsik: and Tom Pigott, our CFO, will then provide an overview of the financial results.

Share some comments regarding our current strategy and outlook.

Dale Ganobsik: At the conclusion of our prepared remarks, we'll be happy to respond to any of your questions.

Once again, we appreciate your participation this morning. I'll now turn the call over to Lancaster County's president and CEO, Dave Ciesinski.

Thanks Dale and good morning everyone. It's a pleasure to be here with you today as we review our first quarter results for fiscal year 2025.

In our fiscal first quarter, which ended September 30, consolidated net sales increased 1.1% to a first quarter record $467 million. While gross profit increased 1.9% to a record $111 million.

Dale Ganobsik: In our retail segment, Net Sales declined 1.1%. Excluding the perimeter of the store bakery lines, we exited this past March, segment Net Sales increased 1.4%. And volume measured in pounds shift through 1.9%.

Our licensing program continue to remain an important source of growth for this segment. Led by Subway Sauses, which we launched this past spring.

Dale Ganobsik: During our fiscal first quarter, we were pleased to also begin the National Launch for Texas Roadhouse Dinner Rules. While it's early days for this proposition, we are highly encouraged by both the consumer excitement and the sales velocity for these great tasting roles.

Dale Ganobsik: Given the magnitude of the demand for this item, we will be executing a phase expansion for this launch, similar to the one we executed for Chick-fil-A sauce a few years ago.

During the quarter, Sarkana scanner data showed that most of our brands continued to perform well. In the produce, dressing category, our Marseilles brand grew sales 2.4%. And increase market share about 25 basis points.

Dale Ganobsik: When combined with Chick-fil-A dressings, our sales in the category increase 2.6% with market share up about 40 basis points.

Sales of our Marzetti brand produce dips at advanced 1.7% with the market shared gain of about 150 basis points.

Dale Ganobsik: In the frozen general category sales of our category leading sister-shoopers brand advanced 5.3%.

When combined with the new Texas Roadhouse dinner roll, sales were up 17.9% and our markets share a grew and impressive 420 basis points to 60%.

In the shelf-stable dressings category, sales of all of garden dressings were up 3.3% at a 10 basis point of market share.

Dale Ganobsik: In the Shelves table, Sausage and Conorments category sales for Chick-fil-A, Sausage Group 3.4% while Buffalo Wild Wing Sausage Group 5%.

Dale Ganobsik: In the food service segment, Net Sales grew 3.5% on increased demand from several national chain restaurant accounts. In addition to strong sales growth for our branded food service products.

Food Service segment volume measured in poundship advanced 3.1% despite industry wide slowing traffic trends.

Despite the challenge in external environment, we are pleased to report record first quarter gross profit of $111 million, and a sequential improvement of gross margin of 220 basis points compared to the fourth quarter.

Dale Ganobsik: Gross Profit margin increased 20 basis points when compared to last year's first quarter as we benefited from higher sales volume and are on going cost-avent initiatives.

Dale Ganobsik: are focused on supply chain productivity, value engineering and revenue management remain core elements to further improve our financial performance.

I'll now turn the call over to Tom Pigott, our CFO for his commentary on our first quarter results. Tom?

Thanks Dave, the results for the quarter reflect continued top line growth and improved gross margin performance.

First quarter consolidated net sales increased by 1.1% to 466.6 million dollars.

Breaking down the revenue performance, higher volume and product mix contributed 380 basis points of core growth.

This growth was offset by a lower net pricing impact of 140 basis points.

Dale Ganobsik: and by the exit of our perimeter of the store breaked bakery product lines, which reduced revenue by 130 basis points.

The lower level of net pricing was consistent across our two segments. In our retail segment, the lower net pricing reflected a higher level of promotional activity versus a prior year first quarter.

Dale Ganobsik: This spending level is consistent with the second half of the last fiscal year when we activated additional programs to address consumer trends.

In our food service segment, the lower net pricing reflects the past through of lower commodity costs to our customers.

Dale Ganobsik: Consulted a gross profit increased by $2.1 million or 1.9% versus the prior quarter to $110.8 million. And gross margins expanded by 20 basis points.

The gross profit growth was driven by higher volumes and our cost savings initiatives.

Priceign that it commodities was not a significant driver of performance as commodities were slightly deflationary and our pricing was as well.

Dale Ganobsik: selling general administrative expenses increased 5.8% or $3 million.

The increase reflects investments in personnel and IT to support the growth of our business as well as higher legal expenses.

Dale Ganobsik: These increases were partially offset by the reduction in project descent costs, our successful SAP implementation project.

Dale Ganobsik: Consolated Operating Income Decreased $970,000 or $1.6% as the gross profit improvement was offset by higher SGA expenses.

Dale Ganobsik: Our tax rate for the quarter was 22.8% versus 23.7% in the prior year quarter.

Dale Ganobsik: We estimate our tax rate for the major fiscal 24 to be 23%.

First quarter, deluded earnings per share increased 3 cents or 1.9% to 1 dollar and 62 cents. As the decline in operating income was more than offset by a return on invested cash in a lower tax rate.

With regard to capital expenditures, our payments for property additions total $17.6 million.

For fiscal 25 we're forecasting total capital expenditures of between $70 and $80 million.

We continue to invest in both cost savings projects and other manufacturing improvements.

Dale Ganobsik: In addition to investing in our business, we also return funds to shareholders, our quarterly cash dividend of 90 cents per share paid on September 30th, represented a 6% increase from the fire years amount.

are enduring streak of annual dividend increases now stands at 61 years.

Dale Ganobsik: Our financial position remains strong with a death-free balance sheet and 135.1 million dollars in cash.

So to wrap up my commentary, our first quarter results reflected continued top-line increases, improved gross profit performance and investments to support further growth. I'm now turning back over to Dave for his closing remarks. Thank you.

Thanks, Tom. As we look ahead, Lancaster Coney will continue to leverage the combined strengths of our team, our operating strategy and our balance sheet in support of the three simple pillars of our growth plan. To one, accelerate core business growth.

To simplify our supply chains or reduce our cost and grow our margins, and three expand our core with focused femining and strategic licensing.

Looking ahead to our fiscal second quarter and the remainder of our fiscal year, we anticipate retail segment sales will continue to benefit from our growing licensing program driven by new product introduction such as subway sauces and Texas Roadhouse dinner rules.

Our newly launched New York Bakerdy brand gluten-free garlic bread will also add to the retail segment sales.

In the Food Service segment, we anticipate continued volume gains from select customers in our mix of national chain accounts.

We also believe external factors including U.S. economic, performance and consumer behavior will likely continue to moderate food service industry demand overall.

With respect to our input cost, we expect both commodities and inflation overall to be neutral for the remainder of the year.

Dale Ganobsik: to

In closing, I'd like to thank the entire Lancaster of Colony team for all their hard work this past quarter and their ongoing commitment to our business.

Dale Ganobsik: This concludes our prepared remarks for today and we'd be happy to answer any questions you might have.

Dale Ganobsik: Operator.

Dale Ganobsik: The End

Thank you. At this time, I would like to remind everyone in order to ask a question, please press star-11 on your telephone keypad.

Speaker Change: Our first question comes from Jim Sellera.

Dale Ganobsik: i

Jim Sellera: I wanted to maybe start by drilling down on food service, just given the outperformance their relative's expectations and I think really relative to...

Jim Sellera: and we would consider a softer backdrop across QSR in general. Is that to happen?

It's football season and chicken's popular around football season and that's kind of a lift or is it?

The National Accounts that you guys are working with, I know there's some that have really prominent chicken and saucy related products promo in the channel right now. Just any color on which driving that out performance and kind of thoughts is a good idea.

would be happy to Jim and good morning. So you know, maybe we'll start externally and then we'll drill in on our company during the period if you look at it, full restaurant traffic was was running in July off too.

2 points in August of 2 points. In Vice-Feptember it had improved modestly to be an off 1 point. QSR traffic.

you know finished the quarter off one point and then correspondingly sales were modestly positive, low single digit positive because of prior pricing. You know, but then if you come in and you'll look at us, I would describe.

really are outperformants, you know, modest outperformants relative to the external factors to a couple of things. One is that you pointed out our mix of national chain customers.

Dale Ganobsik: The fact that we play heavily in chicken and sauces to an important part of that. And then the other contributors, we do have a piece of our business we call branded where we work with operators.

Dale Ganobsik: Up and down the street and in colleges and secondary education and stuff like that in that business perform well in the period also.

You know, as we look forward, our view is we're going to continue to see some consumer headwinds that are going to put, you know, modest downward pressure on traffic until we finally lap this. But we continue to believe that we're in a position based on our book of business and the innovation work we do.

Dale Ganobsik: to deliver low single digit growth, volume, volume metric growth.

and maybe did, like, ask like, a higher level question on the consumer, as we progress through or enter, I guess, calendar 2025.

to give us some ideas around what you would see in the consumer that would have you be.

and that incrementally positive about some of those consumption trends in the new year. Is it just getting past the election, is it interest rate cuts, is it, you know, just anything that you think would be for geold kind of modestly positive. Yeah. Improvements in the consumer.

Speaker Change: So, and I wouldn't, I mean, maybe to clarify, I don't know if I see a lot of things out there in the consumer environment that give me reason to be positive.

We talked about some of these calls before I think a lot of this is tied all the way back to an era of free money.

The fact that consumers were spending and then when rates started to climb, and inflation started to bite these consumers had to start to make some pretty tough trade-offs.

Speaker Change: I think we're in a point now where they be over the last.

Speaker Change: In 18 months we see Wade's growth, exceed inflation

But I think that part of it is going to take time. So I don't think there's necessarily a quick fix. I think what I was pointing to is the fact that we're going to start to laugh these declines. And what I don't necessarily believe is that the declines are going to compound.

and continued to spiral inward. My own personal belief is that consumers and households around the country are balancing sources and uses a cash, and eventually they're going to hit a point of equal labor.

I would distinguish that necessarily from being more optimistic and wanting to grow.

Okay, great to appreciate the color. I'll hop back with you first.

Thank you for the question.

Our next question comes from a line of Andrew Wolfe with CL King, the floor is yours.

Great, thank you and good morning.

Morning on the kind of the profitability divergence of the second quarter in a row.

Speaker Change: where you know food service is down and retail is up.

with volumes of battery food service, obviously there's some pricing. I think sequentially, you know, the food service profitability improved. So is there just some kind of stickyness in your input cost that...

You know, is there some contractual just sort of lag going on versus something structural? Can you help us sort of understand that? Maybe if you're willing to give us a sense when you think.

The Food Service profitability, if it's just contractual or market related, when that could improve or continue to improve, in turn, match the volume.

So, Fair question, Food Service operating decline slightly this quarter really despite divine performance, driven by some higher labor and benefits.

Some supply chain investments were making to improve performance.

Samankramental outsourcing, we've invested in a new food service trade system. We had some higher customer programming costs.

and overall the class savings initiatives that we've benefited from.

It's favored the retail segment a little bit more than the food service segment this quarter.

Overall we have some nice plans to improve performance there. We do expect to get in three of the patients who's going forward.

certainly is outsourcing. We expect that to be reduced in the coming quarters and we have some network optimization plays. So, you know, in total we feel I'm about food service operating income.

prospects, I think this quarter reflected some.

Some investments were making as well as really the cost savings.

that we experience this particular quarter, favorite retail a little bit more. I don't think so. Now, I taught me to talk about the system that we put into the business as well. It's going to help us manage trade, which I think is going to be important both to the sell to our growth and manage our...

Speaker Change: are our spend on trade in that part of the business as well.

Speaker Change: Yeah, that's helpful. So it's not a peanut thing, it's more.

I'm investment, the IG investment that

I guess you have to allocate that.

Speaker Change: and the other one. Good. When does that begin to reflect in, you know, is that going to reflect more in self-tronic in the program?

I think we'll start to see the benefits in the back half of the fiscal. For sure.

We feel very, you know, a lot of the initiatives are going in now and and it both on the manufacturing and the system side and the rest throughout the year we'll continue to see that playthrough.

Thank you. And just one other question if I might on the Texas Roadhouse, Seed the Rolls.

Tom's like

I don't know your budget, but it sounds like pretty...

I know you guys were bullish, but it sounds quite like you've hit some pretty good numbers. So first of all, can you just talk about it versus what you had hoped you would get in terms of distribution?

Follow through and consider trial and then whether there's repeat at this point.

and I think you also put out the idea that there's going to be line expansion. So, you know, just a sense of the near-term numbers, how they're trending and, you know, what the launch could mean down the road.

Yeah, so great question into one that we're really excited to be monitoring. I think as you guys know, this is an item in their restaurants that has a near-cult following.

and so we had it in a test in three markets, Ohio and Indiana and Kentucky and it performed there. Well there, but it's hard to break down on how that's going to work across all retailers.

Speaker Change: During the quarter we expanded full distribution into all of the Walmart and really we had one month September where we had all Walmart stores And that's where we saw the performance of this thing really start to take off now.

You asked a great question about repeat. We only have about four weeks a day to so it's hard to see, but the early indications are that we are seeing two time buyers come in back.

Speaker Change: but it's really, it's hard to say what I would tell you Andrew just to mention lies in this thing. We really didn't have a good sense of how big it can be, but you know, if put it this way, if we translate the trial we're seeing today in the repeat, I think this is something that,

Obviously won't probably get to the size of a Chick-fil-A, but it could rival something like a Buffalo Wild Wings. So it remains to be seen. It's a really powerful item. It's a great brand. It's a great platform. We're able to run it in our own factories.

and we're excited.

Speaker Change: During the call, you heard a mention the fact that given the strength of the demand, we had to go back and look at a regional rollout plan, or a sort of a customer by customer rollout plan here. We've also added to add incremental labor to our factories. We've added another shift to keep up with this demand. So I mean all of this.

Just give me a couple of proof points that it succeeded our expectations in terms of its strength.

We're adding the labor we're adding the incremental capacity and then the harder roll out through the rest of reachyel will begin in Q3 and Q4. So it will be a contributor to this fiscal year, but we believe it'll even be a bigger contributor in fiscal year 26.

but it's just a great example of how this licensing strategy is extensible beyond sauces to really anywhere where you have an iconic product away from home that consumers want to be able to enjoy every day.

Well good, good, that's good to hear. Thank you.

Speaker Change: Of course, thank you.

Speaker Change: Our next question.

Speaker Change: comes from Brian Holland of DA David Ciesinski, the floor is yours.

Speaker Change: Thanks for joining us.

The downward pricing pressure of the retail, which is going on for a few quarters, and you talked about one of the sources of that being some of the new product launches and support of that.

Presuming that obviously continues as some of these launches build over the coming months. Peanock, kind of net neutral and but you do have some cost-says.

Bringing that all together, how do we think about the shape of Gross Margin from here over the balance of fiscal 25?

So overall we grew our gross margin 20 basis points in the quarter and I think from an overall standpoint, we feel on the bounce of the year we can grow beyond that number from a talent standpoint, you're right, we don't have a big.

Peenock, tailwind that we had last year, but at the same time we have a nice productivity pipeline, value engineering, factory automation, SAT benefits.

that we think will help.

Help the retail in the overall company gross margin improvement from that.

Speaker Change: Headwind's standpoint, the things we're watching now on the trade, I want to be clear, we activate additional trade spending in the second half of last year and we continued when we saw consumer trends.

Speaker Change: Start to slow.

In the first quarter we continued that, so over the year of year that was a bit of a headwind.

Speaker Change: We expect that to kind of neutralize in the back half. So that won't be a headwind for margins as we get in the second half. But the things we're watching really is, you know, if we do see further further.

Speaker Change: Consumer pullback, we might have to activate some additional spending but that's not currently in our plans.

and then the other thing we're monitoring from headwind standpoint is the food service traffic that they've talked about. And if we'd de-seef further slow down there, that could be a headwind in terms of factory absorption and the volume impact.

but overall, you know, the increase in gross margin that we experienced in the quarter was in line with our expectations and we expect to do better as the year for us.

Appreciate the color Tom. And then, you know, coming out of the corner, looking at the scanner data.

You know, pretty nice acceleration in the business does not appear to be storm related, seems to be focused on the breads and rolls products, which I don't think are necessarily just Texas Roadhouse, just given how recent that launches. So, Dave, maybe if you could just remind us...

Speaker Change: [inaudible]

Speaker Change: Yeah, so Brian, I think I would point to we felt like there was relative strength across the whole portfolio Both lights and scenes and some of our own brands as far as our consumption goes and as you

pointed out we felt like when you looked at the five week versus the 13 week, get in fact out a little bit stronger.

Speaker Change: and we think that based on the strength of the ideas we have that we should continue to perform relatively well. Now moving in closer to what we have going on in the bakery part of the business.

Speaker Change: We have one relative headwind in its New York Texas toast where we saw the volume there and pounds drop down a little bit in the 13 week and I want to clarify maybe why.

Speaker Change: Last year at this time, a very big, private label supplier that supplies both Croker and Walmart was having supply issues. So we were able to see our share jump from, I don't know, it was maybe 40 points up to 44 as we captured.

Speaker Change: A lot of incremental towns. Now that private label suppliers back online. And we're seeing that we're giving back a little bit of that business. But overall, our New York Texas toast proposition continues to be healthy.

and we are excited about that group, three item that we're going to be building distribution on throughout the remainder of the year. On Sister Schubert, here's another business where we're seeing sales growth and in the more recent period we're seeing pound growth.

One of the noted features last year on this business was, as you recall, we downsize the weight of the role. So if you're tracking our volume in terms of pounds, you saw it was different than our volume in terms of units. We cycles all that now. And you underline proposition continues to be strong.

We're expecting good performance during the upcoming holidays Thanksgiving and Christmas and we're also seeing some distribution builds on things like our cinnamon rolls.

So that part of the business is strong. And now finally on Texas toast, that really only impacted in any notable way the five week. As I said, we expanded from being in just a couple of states to all Walmart's, you know, let's call it roughly 4,000 stores.

and if you look at scanner data there, you can really see that item moving pretty rapidly.

So I think it's strength and end. What's interesting on Texas toast is an end.

You guys are smart enough you are going to be asking this at some point, probably sooner rather than later, how can a ballistic is this going to be towards sister Schubert and more please do reportedly so far?

It seems to be a commenced, we are seeing some very modest cannibalism, but generally this is bringing new consumers to the category. We also believe this brand platform is going to allow us to expand more readily into areas out west.

and the sister's super brand has traveled quite as well. We're optimistic about that.

Speaker Change: Appreciate the color. Maybe last one, just thinking about kind of the dual levers that at least theoretically exist between continuing to build the licensing pipeline and potentially acquisition.

Just wondering from a five versus build standpoint, maybe they're mutually exclusive. Maybe you could do both.

Speaker Change: and Simon Lutany. But obviously just getting back to the food service back drop and the softening at a high level, what we're seeing across the industry.

I think...

I would at least theorize that that should maybe or that could help drive conversations with you all as they would need to the food service players to first of five.

Speaker Change: and their sources of revenue. So maybe just kind of an update on what the licensing pipeline looks like if there's any impact from softening through service traffic and whether that impacts how you think about...

You're willing this to acquire an asset versus, you know, continue to kind of lean in on the building, the pipeline, or if you can do both simultaneously.

Well, maybe I'll start first with the latter Brian and say we believe that we're in a position where we could do both at the same time.

Right with SAP behind us in the capacity expansion project behind us, we feel an acclaim balance sheet.

We are in a position to make an acquisition if the values are right. We have an active M&A process where we're constantly screening, but for us it's going to come down to discounted cash flows and IRRs.

and just looking at, you know, it's just going to be a creative tour, our business and great value for our shareholders.

Now to the second question, on licensing, you've been following us long enough to know that it almost feels like this has built with every passing period. We have more poop points in the marketplace that licensing can coexist in a complementary way with a restaurant's own business.

Speaker Change: Bye!

Speaker Change: and if you go back to the earliest days, some of the restaurant tours were concerned that it would cannibalize, but I think we've all learned now that that's not the case.

Speaker Change: and that it's an incremental source of revenue and it's an incremental way for consumers to engage with their brand.

So with that backdrop, I would say our discussions with prospective licensed partners and with existing licensed partners are as exciting as I've seen in the last five years.

gives us a lot of optimism to move into new areas where we haven't played. So, we're bullish about that also. The good news is, we don't have to worry about overpaying to pursue that business. And it's a way to create value.

Speaker Change: and keep our eye on the ball in terms of how we're spending cheerholder money.

Speaker Change: Let's create all of these with their thanks Dave.

Our next question comes from the line of Altant Stump with Loop Capital, the Floor's Yours.

Speaker Change: Great, thank you. Thank you, and good morning. You're just gonna ask first time.

Speaker Change: I'm a QS star star at the thing, there's absolutely been you know.

I want to talk about how the pricing that hit driven, you know, comparable sales last couple of years is certainly drying up.

But because of that, we're hearing a lot of news, there's going to be an increased focus on driving volume, especially through new products.

As you move into college, you're 25. And you know, one, are you hearing that as well from your customers? And two, could that be a potential driver? You know, for me, major counseling, if we do see more of a so-called traffic versus pricing, over course, in next year.

Yeah, that's a terrific question in the answer is yes.

Speaker Change: For a lot of customers, as they look to drive traffic into stores, you know, Leather one is they focus on value and lover two, they focus on hero items that they can advertise.

and we're finding that the inbound calls to develop hero items has increased for us. So we have a lot of work that's in flight right now to develop. Sausage in particular that we can play on.

and all sorts of different chicken items. So I do think that even in the midst of challenging industry headwinds,

We have in our business a bit of an offset because of our culinary abilities and the ability to scale those to some of the biggest restaurant chains in the country.

Speaker Change: We won't defy gravity. We're going to still be held to some of the same macro trends as everybody else, but I think it allows us to demonstrate a level of, let's call it, relative out performance usually.

That makes sense, that's what David did. You know, I guess just...

I think probably the most impressive number that you gave with all these new things going on, which are certainly very, you know, it's interesting and exciting. But what's the fact that Algard, in which I think it's been, I think in places 2012, was up over 3% for the quarter.

Speaker Change: How much of the role as you're talking to whether it is existing and or potential lessons to stand low, not only are we driving great-go short-term person.

and the Duke Brands we signed on. We have a friend like Alfgard, and that has been in place for a decade with our life in business. But it is growing. How much does that play into the attractiveness you think of the Central Partners to sign up with here?

I think very much so and it's a great observation on your part. I think there was a fear that we would launch the item and it can't be less. The restaurant we got to the other side of that and we'd launch the item and then where do you go from there?

in this case, I want to give a lot of credit to the team at all of Gardons.

We regularly meet with their marketing team, their head of supply chain that oversees this initiative, their head of menu development, and we're constantly looking at new items. In the early days, it was items that were on the menu.

and now I would tell you one of the most exciting features of this. They recognize that their brand has really big shoulders, so we're bringing to the market now.

Speaker Change: and Dressing that are outside of what they serve in their restaurants like Caesar and some of the other stuff we've launched. So I've continued to believe that there's a lot more we can do to mutually grow with our partners at all of guard. They are the case study that I think a lot of other people point to.

Speaker Change: and I'm going to start the video.

Speaker Change: Sure, no, it makes sense. That's what thanks so much. I'll hop back in the queue. Oh, sorry. Thanks, I'll...

Speaker Change: Thank you for your question.

Our next question comes from line of Todd Brooks from the Banschmark Company, the floor's yours.

Hey, thanks for more than everyone.

Good morning, we're done.

wanted to loop back on the

Good service, David, we could obviously...

from Trends in Quarter Relative to what we're seeing in the industry. You talk last quarter about some deferred.

We did time off as it's led out of your fiscal fourth quarter and into the fiscal first quarter.

is the only element of actually in...

Over a abundance of LTOs in this quarter or as you look at the forward.

Speaker Change: and Talander with your restaurant partners. You see a maintenance of this level of healthy activity, so that we shouldn't expect a little bit of a dip off of the volumes that we saw in this quarter.

I mean, maybe go right to the question. We expect it continues to liver, you know, low single ditched growth even in this challenge in environment on the business. Some of that's going to come by way of base where we have customers like Domino's.

which I think are focused on value and they're continuing to outperform.

We have customers like Chick-fil-A which...

I'll be at our scene a little bit more challenging traffic. They're continuing to invest through this environment with new store openings.

and then a fair amount of new item activity with customers. We don't see anything at least right now, Todd, because to believe we need to revise our view on low single digit growth. I think if the economy was a little more optimistic, we might be talking about mid-single digit, but we feel like.

It's proven to advice what a single picture growl today.

Okay, for enough, thank you.

If I look at the retail operating margin, we're reflecting higher here, I think we're...

Speaker Change: We're seeing some of the best margins that we've seen since pre-pandemic for this segment. What's driving that is it? Is it mixed within the business and can you remind us or maybe discuss what the license branded products?

Speaker Change: and that kind of revenue mix on those products and mixes higher. What's dragging the retail segment, Martins Up?

Speaker Change: Maybe I'll start first and just say our strategy on licensing is that the items need to be better than our line average. So when we enter into these agreements and we look at them, we sort of lay a target out there that we need to.

Get to that and um

and so really it's not necessarily that, Thomas, I'll let you get on the activity. You know, within the retail segment.

Speaker Change: I think.

There's a couple things that are helping one. The broader cost savings initiatives programs, the value engineering.

Factory Automation, SAP Benefits, have been skewing more to retail. We also, from a margin standpoint, we've exited a few businesses over the years that we're not as profitable, and that's helping the margins as well. So it's a combination of some of the portfolio choices.

Speaker Change: and the overall supply chain efforts that we're making to improve those margins that it helps retail.

and Tom would have be fair to add in this one too that the pricing in this business lag to a little bit versus food service where Mark the market cost. I'm like, what about? Sure. And so once pricing didn't catch up on that business, we saw the margins return and then as cost in areas have moderated.

and like food service where you give it back that the cost is. So that's been a modest contributor to this overall margin improvement as well.

Okay great, my final one.

Speaker Change: Just I know we kind of touched on acquisition pipeline on the brand side, but you've talked about a second lake where maybe...

The next use of capital is for an acquired facility. The keeps you from this, maybe necessarily building something green field or really helped stop to my current production footprint anything to update us on on that front as far as

Speaker Change: Target, surprogress, you've made there.

Speaker Change: Thanks.

Yeah, Todd, what I would say is we're working on both fronts, I think.

on the factory side, you know, we broadly see ourselves while positioned to continue grow.

Speaker Change: Both with our existing customers and new customers while we're seeing some current softness in food service traffic. We don't see that as a longer term trend and we think we're well positioned with our last portfolio to continue to.

Speaker Change: to expanding growth self.

Speaker Change: So we're definitely working both on the equation for retail looking at some of the brands that fit into our core competencies and Dave said we have an active screening effort and then certainly on the network side we think there's probably an opportunity out there for us as there as well.

and maybe I'll just add to that first point that we're...

Speaker Change: We're trying to constantly balance the long term in the short term.

One of the things that we've done over the last handful of years, we're working together as we've played out a longer term strategy in terms of the categories we want to be in the margins we want to achieve, the growth rates we want to deliver. We've had to go back at points in time and invest in capabilities or prune pieces of the portfolio.

Speaker Change: and Tom pointed to plants in particular. We do feel like there's an opportunity for us just to continue to strengthen our manufacturing network to improve our delivered cost and our service to our customers and set the business up long term. This is very much I think in keeping with...

You know, our priority to thank long-term, execute, short-term, and continue to balance between the two.

Speaker Change: Okay, great. Thank you.

Thank you for your question.

Speaker Change: I would like to remind everyone if you would like to ask the question, please press star one one on your telephone.

Speaker Change: or next question.

Speaker Change: i

Speaker Change: or next question.

comes from the line of Robert Dickinson from Jeffrey's The Floorsors.

Great, thanks so much. I have two pretty quick clarifying questions. So I think I could just say...

through a historic traffic with up in the corridor. So it is first, I wasn't, I just might not have heard it. That was for the industry overall or...

Speaker Change: for your customers.

and then you also have spoke to increased demand from some of those national chains. I'm just trying to get a better sense of, yeah, that is your volume performance.

and I clearly it's being driven by some of the new items and your success of those customers, but is it also, are you kind of implying that, you know, kind of your weighted food service customer base may be doing a little bit better, a little bit more damaged.

Speaker Change: Reload to the end of Sh.

Good afternoon.

Thanks for raising the question, Rob. We didn't in fact say that traffic is growing. What we pointed to is that, you know, if you look to cross.

All restaurant traffic, it improved modestly.

in the period versus where it was. So it was off 200 basis points. Now it's off 100 basis points. So just a relative improvement, particularly in 2 us are when you look at it. But we're still, we still see industry wide traffic being off 100 basis points.

If you look at our unique customers and our mix of business, I would say it's probably performing in line or maybe slightly better.

Speaker Change: We have certain customers like a Taco Bell and a Domino St. Mybeak.

performing a little bit better and then some others that might be lagging.

But, but generally, we're at or slightly ahead of the industry when you look at our book of business. What's really driving our volume out performance is a lot of the custom culinary work that we're doing with concepts that are out there that are heroine, sauces to place on chicken.

and that's really what's driving a lot of our business and we have those items that are out there today and we have a pipeline of activity that's in flight with restaurant concepts for new items that they intend to launch as we go through the year. It's really predicated on that.

Our book of business plus this activity that we have on LTOs that gives us a margin of comfort that we think we can continue to deliver low single digit growth.

Okay, great. And just like as an example if you talk about some of those customers and new items and sauces you're delivering, is that like...

is that something like a pomemento chicken fair which is tick for like adds an example.

Well, that's not one of ours, but that is a great item. That would be, you know, I think if you're watching football these days, you see a lot of chicken items that are being featured. There's a possibility that we might be supporting some of those folks.

Speaker Change: If you go back Rob over the years, we were really a sal dressing company first in the sauce company second, and we've morphed over the last five years and we've become a sauce company first in a salad dressing company second.

Speaker Change: and that activity particularly with the growth of chicken and the need to chicken to have sauces, benefit a big part of what's powered our food service business.

Speaker Change: Okay, fair enough.

you know you're speaking still to the most small-digit volume growth for the year.

Buying compares, I guess, at least, I'll pick up some things. But I see, I should be a little bit easier for the rest of the year. And then you have your comments about, you know, retail benefits from licensing programs.

and the service customer gains. So I'm just very sick as we think for the rest of the year, Q2, Q4, relative to Q1.

If the traffic environment let's just say we're kind of steady for you know from here.

I do that kind of imply that you know, overall volumes, all things considered should maybe accelerate a little bit. I mean, that a lot but maybe a little bit better, so eventually relative to Q1. That's all thanks.

I would love to tell you yes Robb, I think what I would point to is the mix of the volume may evolve a little bit. That I think we have a really strong stack of new items in retail so you're going to see the retail part of the business.

Speaker Change: starts deliver stronger numbers as we go through two, three and into four. The Food Service Business.

Speaker Change: It remains to be seen what happens externally, but I would say consistent, low single digit growth and expect more of that coming from retail than in food service than we've seen in the last couple of periods. This is how we'll get there.

Speaker Change: Sorry, Super. Maybe, since nobody has necessarily asked Robin, if you allow me, I'll just mention on the new item stack that we have in there.

Obviously continuing to build on that exciting item with Texas Roadhouse.

We have a range of dips with buffalo wild wings that we're launching into retail and we're going to be doing a rotation of that.

Speaker Change: at Costco as well. We have a big stack of new items that we're going to be introducing here before too long with Chick-fil-A. We'll be excited to show that with you in due course.

Speaker Change: and other activity with all of garden and others. Again, we're looking at the stack of new items that we think it's actually stronger than the stack that we had in our fiscal year 24, which again gives us a little bit of a comfort saying low single digit and bucking some of the broader trends.

Okay, very helpful. Thank you so much.

Speaker Change: Of course, thank you. Thanks, Rob.

Thank you for your question.

There are no further questions. We will now turn the call back to Mr. Sussiansky for his including comments.

Thank you, operator and thank you everybody for participating in our call this morning. We look forward to sharing our fiscal 25 second quarter results with you in early February. In the meantime, we look forward to seeing you on the road and hope you have a great rest of the day. Bye now.

Speaker Change: i

Thank you, at this time that does conclude our session.

You may now disconnect.

Speaker Change: [inaudible]