Q2 2025 Lancaster Colony Corp Earnings Call
Carmen: Good morning. My name is Carmen, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Lancaster Colony Corporation Fiscal Year 2025 Second Quarter Conference Call.
Speaker Change: Conducting today's call will be Dave Ciesinski, President and CEO, and Tom Pigott, CFO.
Speaker Change: 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.
Speaker Change: If you would like to ask a question during this time, simply press star 11 on your telephone keypad. If you would like to withdraw your question, press star 11 again. Thank you.
Speaker Change: And now to begin the conference call, here is Del Ganobsik, Vice President of Corporate Finance and Investor Relations for Lancaster Colony Corporation.
Speaker Change: These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events.
Speaker Change: A detailed discussion of these risks and uncertainties is contained in the company's filings with the SEC.
Speaker Change: Also note that the audio replay of this call will be archived and available at our company's website, LancasterCounty.com, later this afternoon.
Speaker Change: For today's call, Dave Ciesinski, our President and CEO, will begin with a business update and highlights for the quarter. Tom Pigott, our CFO, will then provide an overview of the financial results.
Speaker Change: They will then share some comments regarding our current strategy and outlook.
Speaker Change: At the conclusion of our prepared remarks, we'll be happy to respond to any of your questions.
Speaker Change: Once again, we appreciate your participation this morning. I'll turn the call over to Lancaster Colony's President and CEO, Dave Ciesinski. Dave?
Dave Ciesinski: Thanks, Dale, and good morning, everyone. It's a pleasure to be here with you today as we review our second quarter results for fiscal year 2025.
Dave Ciesinski: In our fiscal second quarter, which ended December 31st, we reported record highs for net sales, gross profit, and operating income.
Dave Ciesinski: Consolidated net sales increased 4.8 percent to 509 million dollars. Gross profit improved 9.3 percent to 133 million dollars.
and operating income grew 15.1% to $76 million.
Dave Ciesinski: In our retail segment, net sales increased 6.3%, driven by volume growth from both our licensing program and our own brands.
Dave Ciesinski: In licensing, we saw very strong consumer demand for the recently introduced Texas Roadhouse Dinner Rules.
Dave Ciesinski: along with solid contributions from Buffalo Wild Wing Sauces, Subway Sauces and Olive Garden Dressings.
Dave Ciesinski: I'm also pleased to share that our Marsetti branded caramel dips and refrigerated dressings also performed well.
Dave Ciesinski: Excluding the perimeter of the store bakery lines we exited last March, retail segment net sales increased 8.4 percent and retail segment volume measured in pound shift grew 7.4 percent.
Dave Ciesinski: Circana scanner data for the quarter ending December 31st showed strong performance for several of our licensed items and core brands.
Dave Ciesinski: In the frozen dinner roll category, our own Sister Schubert's brand and our licensed Texas Roadhouse brand combined to grow 15.9%, resulting in a market share increase of 440 basis points to a category-leading 60.8%.
Dave Ciesinski: In the Produce Dressing category, our Marzetti brand grew sales 1.4% and increased market share about 30 basis points.
Dave Ciesinski: Sales of our Marzetti brand produce dips advanced 2% with a market share gain of 110 basis points.
Dave Ciesinski: In the frozen garlic bread category, our New York Bakery brand grew sales 2.8%, adding 40 basis points of market share, resulting in a category-leading share of 41.7%.
Dave Ciesinski: In the shelf-stable sauces and condiments category, Buffalo Wild Wing sauces were up over 11% and Chick-fil-A sauce sales grew 1.1%.
Dave Ciesinski: In the shelf-stable dressings category, sales of Olive Garden dressings were up 3.3%, further improving their market share in the shelf-stable dressing category.
Dave Ciesinski: It's worth noting that it's been more than a decade now since we formed our license agreement with Darden and Olive Garden restaurants to sell their eponymous salad dressing.
Dave Ciesinski: Since those early days, we've expanded this amazing brand from one skew in the club channel to a growing multi-skew, multi-channel brand platform with over $160 million of scanner sales.
Dave Ciesinski: I believe the long-term performance of this brand and others such as Chick-fil-A, Buffalo Wild Wings and most recently Texas Roadhouse is a testament to the strength, the potential and the enduring consumer relevance of our licensing program.
Dave Ciesinski: In the food service segment, net sales grew three percent, led by higher demand from several of our core national chain restaurant accounts and increased sales for our branded food service products.
Dave Ciesinski: Food service segment volume measured in pounds shipped advanced 1.5 percent
Dave Ciesinski: Finally, we are pleased to report record second quarter gross profit of $133 million. When compared to last year's second quarter, gross profit margin improved 110 basis points to 26.1 percent.
Dave Ciesinski: The $11 million increase in gross profit was driven by the higher sales volumes, more favorable sales mix, the positive impacts of our ongoing cost savings initiatives, and some modest cost deflation.
Dave Ciesinski: Our focus on supply chain productivity, value engineering, and revenue management all remain core elements to further improve our margins and financial performance.
Dave Ciesinski: I'll now turn the call over to Tom Pigott, our CFO, for his commentary on our second quarter results. Tom?
Tom Pigott: Thanks Dave. Overall, the results for the quarter exceeded our expectations. The company delivered strong top and bottom line results.
Tom Pigott: Second quarter consolidated net sales increased by 4.8% to $509.3 million.
Tom Pigott: Breaking down the revenue performance, higher volume in product mix contributed 580 basis points of core growth.
Tom Pigott: This growth was partially offset by the exit of our perimeter-of-the-store bakery product lines, which reduced revenue by 110 basis points.
Tom Pigott: A slightly higher level of net pricing makes up the balance.
Tom Pigott: Consolidated gross profit increased by $11.3 million or 9.3% versus a prior year quarter to $132.8 million, and gross margin expanded by 110 basis points.
Tom Pigott: The gross profit growth was driven by higher volumes and favorable sales mix, our cost savings initiatives, and some modest cost deflation.
Tom Pigott: Selling general and administrative expenses increased 1.4 million dollars over 2.5 percent.
Tom Pigott: The increase reflects $1.6 million for integration costs for the planned acquisition of the Atlanta-based manufacturing facility we recently announced.
These costs are primarily comprised of IT and legal expenses.
Tom Pigott: Consolidated operating income increased $9.9 million, or 15.1%, driven by the gross profit improvement partially offset by the integration costs I mentioned.
Tom Pigott: During the quarter the company chose to transfer its remaining legacy pension plan assets and liabilities to a third party.
This transfer effectively terminated the company's pension plans.
Tom Pigott: It's important to note that these plans were frozen and relate to plant operations that were closed many years ago.
Tom Pigott: The plan's participants will either continue to receive their benefits from the third-party insurance company or elected to take a lump-sum benefit payment in December of 2024.
Tom Pigott: As a result of the termination, the company recorded a $14 million non-cash pension settlement charge to recognize all the unamortized costs associated with the plant.
Tom Pigott: Our tax rate for the quarter was 22.5% versus 23.4% in the prior year quarter. We estimate our tax rate for the remainder of fiscal 25 to be 23%.
Tom Pigott: Second quarter diluted earnings per share decreased 9 cents or 4.8 percent to $1.78 as the growth in operating income was offset by the pension settlement charge.
This charge reduced EPS by 39 cents per share.
Tom Pigott: In addition, the acquisition integration costs reduce EPS by $0.05 per share.
Tom Pigott: With regard to capital expenditures, our payments for property additions totaled $28.7 million for the fiscal year-to-date period.
Tom Pigott: For Fiscal 25, we are forecasting total capital expenditures of $70 to $80 million.
Tom Pigott: We continue to invest in both cost-savings projects and other manufacturing improvements, as well as the planned acquisition of the Atlanta-based manufacturing facility.
Tom Pigott: In addition to investing in our business, we also return funds to shareholders.
Tom Pigott: Our quarterly cash dividend of 95 cents per share, paid on December 31st, represented a 6% increase from the prior year's amount. Our enduring streak of annual dividend increases stands at 62 years.
Tom Pigott: Our financial position remains strong with a debt-free balance sheet and $203.1 million in cash.
Tom Pigott: We expect to deploy $75 million toward the purchase of the Atlanta Manufacturing Facility.
Tom Pigott: We also will spend an additional $10 million in capital expenditures on the facility, which is included in the fiscal 25 forecast I provided.
Tom Pigott: To wrap up my commentary, our second quarter results reflected strong top-line growth, improved gross margin performance, and double-digit operating income growth. In addition, we're continuing to make investments to support further growth and cost savings.
Tom Pigott: I will now turn it back over to Dave for his closing remarks. Thank you.
Dave Ciesinski: Thanks, Tom. As we look ahead, Lancaster Colony will continue to leverage the combined strength 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.
Dave Ciesinski: 2. Simplify our supply chain to reduce our cost and grow our margins 3. Expand our core with focused M&A and strategic licensing
Dave Ciesinski: Looking ahead to our fiscal third quarter and the remainder of the fiscal year, we anticipate retail segment sales will continue to benefit from our expanded licensing program and growth from investments and innovation for our own brands.
Dave Ciesinski: We are very excited to share that beginning this spring, we'll be expanding distribution for Chick-fil-A sauces into the Strategic Club Channel.
Dave Ciesinski: On the food service side of the business, we anticipate continued growth from select customers in our mix of national chain accounts along with ongoing contributions from our branded food service products.
Dave Ciesinski: We anticipate external factors, including U.S. economic performance and consumer behavior, will continue to impact demand for the food service industry overall.
Dave Ciesinski: With respect to input cost in aggregate, we do not anticipate significant impact from commodity cost inflation or deflation in the remainder of the year.
Dave Ciesinski: Before I conclude, I would like to comment briefly on the pending acquisition of the Atlanta-based sauce and dressing facility that we announced last November. We remain on track to complete this transaction during this current quarter, which ends March 31st.
Dave Ciesinski: incremental capacity, and closer proximity to certain core customers, all the while enhancing our manufacturing network from a business continuity standpoint.
Dave Ciesinski: We evaluated several strategic scenarios to support the continued growth of our sauce and dressing operations and identified this opportunity as the most practical and cost-effective solution for our long-term business needs. We very much look forward to welcoming the plant's employees to our Marsetti team.
Dave Ciesinski: In closing, I'd like to thank the entire Lancaster Colony team for all their hard work this past quarter and their ongoing commitment to our business.
Dave Ciesinski: This concludes our prepared remarks for today and we'd be happy to answer any questions you might have.
Speaker Change: Operator. Thank you and as a reminder to ask a question press star 1 1 on your telephone keypad. One moment for our first question please.
And it comes from the line of Jim Salara
Jim Salara: Hey, good morning, Dave. Good morning, Tom. Thanks for taking our questions. Hey, Jim. Good morning. Good morning, Jim.
Jim Salara: really strong results, certainly ahead of our expectations. And you mentioned, you know, some of the drivers there on the license side of the business.
Speaker Change: Could you just give us a little more detail as to which of the licensed products you called out had the biggest impact? And then if I could maybe tag on a part two to that question.
Jim Salara: With the expansion of Chick-fil-A into Club and then no more laps from the perimeter exit, is it fair to say that, you know, retail sales should kind of continue to accelerate as the year moves on?
Jim Salara: What was it that impacted the current quarter than what our outlook is?
Jim Salara: As pertains to retail and licensing in particular, what I would tell you, it was a combination of different brands. You know, first, it's the introduction of the Texas Roadhouse Rolls, which are available today only in...
Jim Salara: And if you look at scanner sales, that accounted for an important component of that growth. The second is Buffalo Wild Wing sauces. This is an item that's been around now about six years.
Jim Salara: it was up about 12% in terms of pounds. So it had a really good period as well. And then both Olive Garden and Chick-fil-A sauces continued to grow as well. But I think that's sort of the ranking and sequence of how these things contributed.
We had a really good season for caramel dip.
Jim Salara: and Sister Schubert continued to grow as well. And what you don't see in Sister Schubert is we made the decision to exit a channel that created a bit of a headwind on that because the margins were low. But we were able to overcome that, still deliver some incremental growth and improve our margin profile. So I think net-net it was balanced between licensing and our own brands with licensing growing a little bit more.
Jim Salara: Now, your second question is an important one. How do we think about the outlook? You know, we're bullish about our new product pipeline. We're continuing to be optimistic about how our core brands are holding up. So, you know, we're looking at probably...
Jim Salara: to low single-digit growth, just depending on how things play out with consumers.
But certainly, we're pleased with how things are going.
Jim Salara: Great. And then maybe if I could just sneak in a question on food service. And Jim, by the way, that's all pound driven, just so you know. There's no assumption in pricing on that.
Okay, great. That's helpful. On food service...
Speaker Change: You mentioned the core national accounts being the drivers there. I know in QSR in particular...
Speaker Change: There's been a lot of focus on kind of let's just say value centric messaging You know price points versus kind of LTOs and in flavor extensions do you have any sense in the conversations you're having with your food service partners if
Speaker Change: we're going to see kind of a return to the the more experiential focus messaging as the the consumer gets a little bit better as the year progresses.
Speaker Change: The conversations that we're having with them, they continue to be somewhat circumspect. I don't think they're expecting a miracle recovery. I think generally the consensus is that the summer was probably going to be the low point and then we're going to see modest sequential improvement as we push forward.
Speaker Change: If you look at our most recent results, the business was up three points. It was a point and a half of volume, it was a point and a half of pricing that gets you to that three percent.
Speaker Change: in Pizza QSR and we're winning effectively with them. As far as their positioning, you know, their menus going forward...
Speaker Change: If passes prologue, Jim, what we typically see is that they focus on value until they real- and it brings more traffic back into the restaurant, but it really doesn't help them with margins.
Speaker Change: and it doesn't help with their franchisees' profitability overall. So I think what I would expect to see is certainly not a more intense focus on value. You may begin to see that start to wean down a little bit more and just more focus on delivering great food.
Speaker Change: Awesome, I appreciate all the detail guys, I'll hop back in the queue.
Thank you.
Operator: Our next question comes from the line of Alton Stump with Loop Capital. Please proceed.
Alton Stump: Great, thank you. Good morning and I appreciate you taking my questions.
Alton Stump: you know, with the frozen dinner rolls. It sounds like dinner rolls for them have become an even bigger business than your sauces. One, is that accurate? And two, you know, how much of, you know, a surprise has that been given effect that, you know, once again, that that was a secondary offering that came after you, you know, first introduced our sauces last year?
Alton Stump: Yeah, it's a great question Alton. You know what I would tell you and I know you're very familiar with the restaurant space and you visited Texas Roadhouse and for anybody like you that has you know those roles are iconic. That's one of the reasons that people visit those restaurants.
Alton Stump: and one of the teams that that we're pleased about and our partners at Texas Roadhouse are pleased about is that we've done a really nice job of really mirroring the taste of that roll that's available in the restaurant.
Alton Stump: So we've got it so far into Walmart, 4,000 of their stores, and it's performing exceptionally well. If you look at the scanner data sales, when we can keep it in stock, it's running somewhere between a million and a half per week.
Alton Stump: So, it's really performing well, but I think it goes back to the lesson that we've learned with Olive Garden, with Buffalo Wild Wings, and with Chick-fil-A, when you can take an iconic product from a strong restaurant property with a loyal following.
Alton Stump: across all channels in all stores, not club, but all channels in retail and mass, and then we'll revisit club at some point in the future. But it's been an exciting development. It's exceeded our expectation.
Alton Stump: Enough so that we've had to actually take one of our bakery plants and add not just one, two more shifts to keep up with the demand.
Okay, great. Well, that's been brilliant.
Alton Stump: you know, primarily driven their comp growth. That's now, you know, all but gone away. So given that environment where you're going to have a lot of focus on, you know,
What would you guys include in a product?
Alton Stump: and or similar items, how much of a benefit do you think that could be to you as you look at the course of calendar 25 if we do indeed see an increased focus?
Speaker Change: Put me to QSR customers on, you know, pick a new product to drive traffic. Yeah So, you know our outlook for the industry is that it's problem on this is traffic not sales But traffic alone is that it's likely to continue down. Let's say one or two points
Speaker Change: our view on our business in food services that will be flattish. So we believe that based on this composition of customers, we'll be able to overcome those trends. To the degree to which the consumer gets stronger and traffic improves in restaurants,
Speaker Change: give you guys an indication that sales would trend back into the low to mid-single digit range. But for now, predicated on the macroeconomic outlook, I think we're holding fast at sort of flat-ish on this business, but poised to recover when the industry recovers.
Speaker Change: Thanks so much, Dave. I appreciate it. I'll hop back in the queue. Thank you.
Thank you.
Speaker Change: Thank you. Our next question comes from the line of Brian Holland with DA Davidson. Please proceed.
Brian Holland: Thanks, good morning, and congratulations on the strong results. If I could just, maybe just quickly on the gross margin and specifically the input cost outlook.
Brian Holland: Obviously, I think you called out modest deflation in the quarter, if I have that right. Just extrapolating that out forward, because I think that's obviously an improvement, maybe, from where we've been. So just as we tease that out over the second half of the year, what's your view on how that
how that dynamic shakes out.
Brian Holland: and that's a key input cost for us but we're getting the benefit from lower soybean oil and grain costs so when you net it all together we're looking at a flat outlook for the second half.
This opens up more revenue capacity, you know, implying that...
Brian Holland: demand has increased, there's more innovation opportunities, etc., etc., versus strategic optionality, kind of looking at your manufacturing network. So, the first one's probably, to some extent, self-explanatory, but on the second one, you know,
Brian Holland: The ability of this plant to expand your margins over time, picking up some more cost synergies through optimization, etc. And maybe just kind of, I appreciate you probably wouldn't want to quantify that, but maybe just timeline for when we might start to see those benefits flow through?
Tom Pigott: I'll address the first part of the question and then let Tom expand on margins.
Tom Pigott: Honeymuster require cooking, whereas things like a ranch dressing, for example, don't. You're just mixing ingredients and then packaging on those. So this plant, importantly, provides us both cooked and non-cooked, which gives us a lot of options to play both in sauces and in dressings.
that we're going to be able to use.
Speaker Change: For example, Haasia, which we use for Chick-fil-A. They're not a supplier today. You can expect in due course for us to put that down there and it'll provide a benefit for both us and for Chick-fil-A by way of where it's located. So I would say the single biggest thing that it gives us, Brian, is a great mix of cooked and non-cooked, a range of different packaging platforms.
Speaker Change: and it's in a highly cost-effective location for us in terms of proximity to customers.
Speaker Change: Now, what I'll let Tom talk to you is then how does this sort of feather into our outlook on things like margins and things like that in due course. I'll turn it over to you, Tom.
Speaker Change: This facility allows us to continue to grow without an additional greenfield option.
Speaker Change: So it supports our growth over the next five years as we've modeled it out.
Speaker Change: Margin accretion from this business as you mentioned we're probably not ready to quantify the specifics on that But it it's it's projected to provide nice
Speaker Change: growth and margin accretion for us. The one thing I want to make sure we highlight for you, and we mentioned this in the initial release.
Speaker Change: in the 8K, is that for a period of time we're going to be manufacturing costs.
manufacturing products for the seller of this facility.
Speaker Change: So we'll be picking up some of their business, and we agreed to do that to facilitate the transaction. We'll be splitting out that revenue separately. We don't expect it to have a significant profit impact, but we'll want you to take that out because we view it as non-core.
Speaker Change: and short-term in nature. So, overall, we feel very good about this acquisition and we expect it to have a nice return for our shareholders. And as we get further in, we'll share more with you.
Speaker Change: Thanks Tom and Dave, that's very helpful. Maybe just last question, just because I probably left some things incomplete in that first question with respect to input cost.
Speaker Change: Good color there, thinking about the balance of the year, specific to input costs. But if we broaden that out and talk about gross margin, I would presume that throughput benefits on the volume was the primary driver of the gross margin expansion.
Speaker Change: into Q. And if we expect volumes to sustain, then margins should be higher over the second half of the year. I just want to clarify and separate that.
Speaker Change: point from the fact that input costs would be closer to flat? Tom, if you could help there. Yeah, I think as we look at the second half, we do expect.
Speaker Change: further to our margin growth, why we won't have the commodity tailwind.
Speaker Change: So, as we look at it, you know, we expect to be able to grow our margins in the second half at similar levels to the first half, maybe in the 50 to 100 basis point range, as we get greater cost-savings initiatives. And the only headwind that could be an impact to that is the integration of the Atlanta Manufacturing Facility, the ramp-up, and how that all goes. But certainly we'll give you those impacts as they occur.
Fantastic. Leave it there. Thanks.
Speaker Change: Thank you. And as a reminder, to ask a question, simply press star 11 on your telephone keypad.
Speaker Change: Our next question is from Scott Marks with Jeffries. Please proceed.
Speaker Change: Hey, good morning guys. Thanks so much for taking my questions.
Yeah.
Speaker Change: I just want to follow up on some of the conversation there on the gross margin side. You know, if my numbers are correct, the gross margin that you guys put up in Q2 is the best in four years that it's been. Obviously, going through the cost inflation cycle and everything else that's happened over the past few years.
Speaker Change: I know you spoke to some of the drivers why that's the case, but wondering if you could maybe give a little bit more detail about kind of the journey that you've been on and how you got to this, you know, 26th place.
Speaker Change: David Ciesinski, Thomas Pigott, David Ciesinski, Thomas Pigott, David Ciesinski, David Ciesinski,
Speaker Change: Our costs go up to 20% and we pass it on dollar for dollar into our pricing, i.e. our sales. But that in and of itself drove several hundred basis points of margin compression.
Speaker Change: is you've seen us, you know, we've been able to hold on to pricing as we've seen a little bit of deflation and Thomas talked about that.
Speaker Change: But the other thing that's happened is a lot of the noise in the business is behind us. Our ERP implementation is behind us.
The construction of the horse cave facility is behind us.
Speaker Change: and we're getting back to more of the ordinary course. So as Tom pointed out, as we think about the outlook going forward, we don't expect some big tailwind from commodities. If we get it great, then you can expect to see that reflected in margin.
Speaker Change: But our view is we're going to be able to build on the trends that you see sequentially because of just going back to our roots of driving productivity, manufacturing and conversion productivity at the front and the back of our lines.
Speaker Change: procurement productivity, and supply chain and logistics, excuse me, transportation and logistics productivity. So we have a big catalog of initiatives that the team is running. They're doing a very nice job.
Speaker Change: and I have every confidence that you'll see that continue to improve. So we don't think, you know, just to put a fine point on it, that that was a one-off. Clearly it was a high-water mark, but we expect it to continue to build on every one of the quarters going forward.
Speaker Change: Appreciate that, thank you. And next question for me, I know you call that some of the drivers of...
Speaker Change: top-line retail volume strength, including some of the licensed brands. You called out some of the Marzetti products, some of the New York brand products.
you know, obviously.
continue to crush it in the marketplace.
Speaker Change: Good core performance plus breadsticks is what's providing the tailwind on New York.
Speaker Change: Our gluten-free item is small, but it's providing incrementally to that as well. If you look at Sister Schubert, great execution in the holiday season, which is vital on this brand. And then I would add to that that our Sweet Rolls are doing well on that business.
Speaker Change: If you look at our Marzetti, our Classics proposition has continued to perform well. And over the last, let's call it year, we've restaged Simply, and that part of the portfolio has been performing better.
Speaker Change: Within Marzetti dressings and dips, we had a particularly good caramel season. When we can get that product with our key customers, Walmart, Kroger...
Speaker Change: and the others, out early in the season and merchandise near apples. It just performs well. And this is one of those years where our retailers were willing to really work with us. They got it out early.
Speaker Change: and it really performed well for us. So really, it's kind of a mix of, in some cases, the right SKUs, like the value pack on sticks, and in other cases, it's just good retail execution by the selling organization. Just good, solid fundamentals.
Speaker Change: Got it. And then one last one from me. You know, one of the things I don't think I've heard just
speak really pointly.
Speaker Change: Yeah, so if you unpack our trade spending, one of the things that we talked to you about is that we took up our level of trade spending in the back half of last year retail.
modestly.
Speaker Change: and that we intended to keep it up in the first and second quarter. We were going to take the overall spending rate.
Speaker Change: and sort of level load it. So it's going to be a little bit higher in the first and second quarter and then marginally lower in the third and fourth quarter.
Speaker Change: But as it pertains to promotions, what I would focus your attention on, Scott, is I just recently went through all of our updated elasticities with our retail team.
Speaker Change: And what we're finding is that heavy trade spending isn't really driving the incrementality that we would have expected. So as we think about trade spending going forward, we're going to be somewhat cautious about it.
Speaker Change: There are certain products where it seems to work better than others. If we can get feature and display, particularly on things like our licensed sauces, get it on an end cap, it really helps us drive household penetration and performance.
Speaker Change: But we don't think that it's a lever that we're going to want to lean into in this environment outside of very point-specific activities.
Understood. Thanks so much. I'll pass it on.
Speaker Change: Thank you. Our next question comes from the line of Andrew Walsh with CL King. Please proceed.
Thanks. Good morning. Congratulations on.
Speaker Change: A few questions on the Texas Roadhouse Dinner Rolls, I think you know you've said it's right now it's still only at Walmart. Correct.
Speaker Change: Can you talk about, you know, is that being featured there or is that just sort of in
Speaker Change: about repeat sales from similar customers or if it's still sort of in the trial phase? Yeah, so we'll hit those questions in sequence, Andrew. So first, just as context, it's one single SKU.
Speaker Change: a period of exclusivity while we build capacity to launch it into the rest of retail. But that one skew at retail is not being featured.
It's not getting incremental display.
Speaker Change: It did get a fair amount of viral support by way of social media once it became aware that the product was out there. And it's just pulling right off of the shelf. So there's really nothing incremental being done in terms of marketing and promotion to facilitate this.
Speaker Change: somewhere between a million and a million and a half per week.
Speaker Change: As we launch it into full retail, I would expect to see those numbers at Walmart start to pull down as it becomes available at other places.
Speaker Change: Now, your last question about repeat is a really, really important question. And what we're seeing is the repeat on this item is actually quite high. The purchase cycle is actually somewhere in the range of like 13 days.
Speaker Change: So in many cases we're seeing people come back twice a month to buy this item, which in a frozen category is faster than anything that I've seen.
Speaker Change: You know, Sister Schubert tends to be a heavy holiday item and maybe a Sunday dinner item, where this item is the everyday item. If we look at it today, it's been the number one item available in frozen bread, and when you measure it across
All of Frozen, just the velocity of the items.
It's a performing question. Also,
Speaker Change: used to perform in the marketplace, and importantly how we take the platform of Texas Roadhouse and expand it into more SKUs and more channels and help this brand and this channel achieve all of its full potential.
Speaker Change: Got it. So the ACV outlook sounds quite promising I would imagine. Yes. Whenever that excludes, can you just
Speaker Change: Speak to the exclusivity period, or is that a trade secret? Beginning, no secrets here, beginning in April we'll begin to ship it into four states.
Speaker Change: And then really beginning in August, once we're fully in capacity, we'll begin to ship it to the rest of retail.
Got it.
So, modest P&L benefit going forward.
Okay, thank you.
Speaker Change: Thank you so much. And as a reminder, to ask a question, simply press star 11 to get in the queue.
Speaker Change: All right, I don't see any further questions in the queue. I would like to turn the call back to Mr. Ciesinski for his concluding comments.
Dave Ciesinski: Thanks operator and thank you everybody for participating today. Before we wind up the call I wanted to make just a couple of comments about all of the emerging discourse that's taking place out in in the industry about Make America Healthy Again.
Dave Ciesinski: really key facts. First, as our tagline, The Better Food Company, implies, we have and we always will comply with all state and federal food regulations.
Dave Ciesinski: Very few of our products contain many of the chemical ingredients of concern that are receiving attention today.
Dave Ciesinski: And then I want to assure you that to the degree to which any of our ingredients, those which are receiving some scrutiny today, or anything else for that matter, come under scrutiny, we have every confidence that our industry-leading culinary...
Dave Ciesinski: R&D team will enable us to adapt to meet consumer needs and continue to grow a big, strong, and relevant food company to supply our critical restaurant partners as well as consumers in the categories in which we compete.
Dave Ciesinski: A lot of interesting times in the food industry these days and I just want to assure you guys that are following us that we are keeping track of this discourse and we're plotting a strategy to ensure that.
Dave Ciesinski: We always serve safe food and relevant food and meet the needs of all of our stakeholders. So that ends our call today and our comments. We look forward to being with you guys in a few months where we go over our Q3 results. We hope you guys have a great rest of the day.
Dave Ciesinski: And thank you, everyone, for participating in today's conference, and you may now disconnect.
Music Music Music Music Music Music
Thank you for watching!
Dave Ciesinski: Friends of the Tide Friends of the Tide Exactly what Thursday was about Surprising