Q1 2025 B&G Foods Inc Earnings Call
Michael Lavery, B&G Foods Inc
Speaker Change: Good day, and welcome to the B&G Foods First Quarter 2025 earnings call.
Speaker Change: Today's call, which is being recorded, is scheduled to last about one hour included remarks by B&G Foods Management and the question and answer session.
Speaker Change: I would now like to turn the call over to AJ Schwabe, Senior Associate, Corporate Strategy and Business Development for B&G Foods, AJ.
Speaker Change: Good afternoon, and thank you for joining us. With me today are Casey Keller, our Chief Executive Officer, and Bruce Wacha, our Chief Financial Officer.
Speaker Change: You can access detailed financial information on the quarter and earnings release we issued today, which is available at the Investor Relations section of BGFoods.com
Speaker Change: Before we begin our former remarks, I need to remind everyone that part of the discussion today includes forward-looking statements.
Speaker Change: These statements are not guarantees of future performance and therefore under-aligned should not be placed upon them.
Speaker Change: We refer you to B&G Foods' most recent annual report on Form 10K and subsequent SEC fileings for more detailed discussion of the risks that could impact our company's future operating results and financial condition.
Speaker Change: B&G Foods undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events, or otherwise.
Speaker Change: We will also be making references on today's call to the non-GAF financial measures, Adjusted
Speaker Change: Adjusted net income, adjusted deluded earnings per share, adjusted gross profit, adjusted gross profit percentage, based business net sales, and segment adjusted expenses.
Speaker Change: Reconciliation of these financial measures to the most directly comparable GAAP financial measures are provided in today's earnings release.
Speaker Change: Case, you will begin the call with opening remarks and discuss various factors that affected our results. Selected business highlights and its thoughts concerning the outlook for the remainder of fiscal 2025.
Speaker Change: Bruce will then discuss our financial results for the first quarter 2025 and our revised guidance for fiscal 2025. I would now like to turn the call over to Casey.
Speaker Change: Good afternoon. Thank you, AJ, and thank you all for joining us today for our first quarter 2025 earnings call. Today, I will cover an overview of first quarter results and the key drivers. Bruce will cover more specific financial results.
Speaker Change: and Outlook for the remainder of fiscal year 2025. Actions to improve performance in EBITDA delivery and an update on our portfolio reshaping efforts.
Q1 Results
Speaker Change: The first quarter results reflect the challenging environment in the packaged foods industry at the start of 2025, after relatively solid performance in the fourth quarter of 2024.
Speaker Change: Netsales in quarter one, 2025 were down minus 10.5%, driven by a major decline in January of almost 20% versus last year.
Speaker Change: Netsale's trends improved throughout the quarter and continued to improve in April and early May.
Speaker Change: Adjusted EBITDA was down $15.9 million to a large extent reflecting the lower net sales in the quarter and increased cost and investment in the green giant US business.
Speaker Change: Some of the key drivers of first quarter performance were consumption trends.
Speaker Change: Like other Package Food Center store peers, B&G Foods consumption trends have not yet stabilized following the high inflation and consumer reaction over the past couple of years
Speaker Change: Across measured and unmeasured channels, our consumption was approximately minus 6% in the quarter one period
Speaker Change: We expect the trends will improve in the back half as we lap negative comps from the middle of last year The trends are also starting to improve with April consumption minus 2 to 3% across the portfolio
Speaker Change: Retailer Inmentories. During January and February , B&G Foods significantly undershift consumption across major retailers.
Speaker Change: Many retailers reduced weeks of supply by almost two weeks and cleared remaining fall merchandising stock more rapidly than in previous years.
Speaker Change: We estimate the net sales impact was roughly $15 million in quarter-one [inaudible]
Eastern Timing Shift
Speaker Change: In 2025, Easter fell in late April versus March in 2024. Easter merchandising, principally on the green giant and Christopher Brands was shipped and executed in April this year against Easter performance in March last year.
Speaker Change: We estimate the net sales impact to be approximately $8 million in quarter one, shifting into Q2.
Speaker Change: Green Giant. The U.S. Frozen Green Giant business drove approximately two-thirds of the total B&G adjusted EBITDA decline versus last year.
Speaker Change: The frozen and vegetable business unit, segment EBITDA, declined $9.3 million in the first quarter. During Q1, we increased short-term promotion investment to support the brand and meet key retailer needs.
Speaker Change: In addition, seasonal pack costs were high, reflecting crop issues on core vegetable lines, predominantly corn and peeps
Michael Lavery, B&G Foods Inc.
Let's clear your 25 outlook.
Speaker Change: We are seeing improving friends in April and early May that sales and volumes.
Speaker Change: But because of the slow start in quarter one and a more gradual recovery in consumption trends, we are revising both net sales and adjusted EBITDA guidance down for fiscal year 25.
Speaker Change: The net sales range is now $1.86 to $1.91 billion with adjusted EBITDA at $200 to $290 million, $280 to $290 million.
Speaker Change: Our expectation is that underlying net sales and consumption trends improve to minus 2% to flat in the second half, with a benefit of a partial 53rd week in the fourth quarter.
Speaker Change: We continue to see uncertainty in the near-term one center store trends, but fully expect to lap the impact of changing consumer behaviors in food purchases following high inflation.
Speaker Change: For adjusted EBITDA, we have lowered the range by $10 million for fiscal year 25 based largely upon the decline in the first quarter.
Speaker Change: However, we have also implemented efforts to reduce operating and overhead costs in the third and fourth quarters, which we expect to deliver $10 million in projected savings for this year, with an annual run rate of $15 to $20 million.
Speaker Change: These include additional productivity and cost of goods sold, trade and market spending efficiencies, accelerated SG&A savings, and discretionary spending cuts.
Speaker Change: We also forecast some favorability from the Mexican peso foreign exchange on the portion of the green giant business manufactured in Mexico.
Portfolio Shaping
Speaker Change: B&G Foods remains committed to reshaping and restructuring our portfolio to sharpen focus, simplify our portfolio, improve margins and cash flow, and maximize future value creation. This is a very high priority for the company and critical to our future strategic direction and then risk profile.
Speaker Change: The end game is to create a more highly focused B&G Foods with adjusted EBITDA as the percentage of net sales approaching 20%.
Speaker Change: Increase cash flow generation, lower leverage closer to five times, a more fission cost structure, and clear synergies within the portfolio.
Speaker Change: And ultimately, to build a stable platform that can be the foundation for future focused M&A growth in our core business lines, principally spices and seasonings, Mexican meal preparation, and baking staples.
Speaker Change: As previously discussed, we have been evaluating the frozen and remaining canned vegetable businesses for a possible investor and sale of some or all of the assets in the frozen and vegetable business unit.
Speaker Change: Green Giant remains a strong brand with broad awareness and distribution and the front-and-vestual category is on trend with health and dietary trends
Speaker Change: It just may not be the right fit with B&G Foods' focus and capabilities. Particularly since there are no plans to add more assets in the frozen portfolio, given the opportunities in our core shelf-stable businesses and overall capital constraints.
Speaker Change: We are also evaluating investors of other non-core business in the portfolio with any proceeds from investors used to pay down debt.
Speaker Change: Thank you and I will now turn the call over to Bruce for more detail on the quarterly performance and outlook for the remainder of fiscal year 2025.
Bruce Wacha: Thank you, Casey. Good afternoon, everyone. Thank you for joining us today. As you can see, despite a reasonably strong finish to 2024, we had a very challenging start to 2025.
Bruce Wacha: For the first quarter of 2025, we generated $425.4 million in net sales
$59.1 million in adjusted EBITDA.
Bruce Wacha: 13.9% adjusted EBITDA as a percentage of net sales and 4 cents in adjusted daily related earnings per share
Bruce Wacha: The cadence of our year start deserves more context than usual regarding our monthly net sales performance as compared to the prior year periods.
Bruce Wacha: January and February were especially challenging with February showing improvement versus January .
Bruce Wacha: We experienced a similar retailer just talking phenomenon that many in the industry peers have reported at the start of the year.
Bruce Wacha: During this period, we undershift versus our consumption in retail track channels.
Bruce Wacha: March demonstrated progress despite the Easter holiday shift to April , with net sales down approximately 5%.
Bruce Wacha: As an encouraging preview of what may lie behind, April has begun the show signs of the stabilization we've anticipated with net sales down only 2%.
Bruce Wacha: This improvement was driven in part by strong performance from green giant and both the frozen and shelf stable categories.
Thank you. Bye.
Bruce Wacha: Overall, net sales for the first quarter of 2025 decreased by $49.8 million, or 10.5% to $425.4 million from $475.2 million for the first quarter of 2024.
Bruce Wacha: Based business net sales, which for this quarter largely match our net sales, decreased by $49.9 million or $10.5% in the first quarter of 2025 compared to the first quarter of 2024.
Bruce Wacha: 42.4 million dollars or 8.9 percentage points of the decline in base business net sales was driven by lower volumes 5.5 million dollars or 1.2 percentage points of the decline was driven by a decrease in that pricing and the impact of product mix
Bruce Wacha: and approximately $2 million or 0.4 percentage points was driven by the negative impact of foreign currency.
Bruce Wacha: Net Cells for Frozen and Vegetables, and Chris Goh, accounted for approximately 44% of the decline in our net sales for the quarter.
Bruce Wacha: Net sales of frozen and vegetables decreased by $11.8 million or $11.2%. Reduce volumes, particularly in January and February , to over approximately one half of the decline.
Bruce Wacha: Additionally, we significantly increased our promotional trade spending to support green giant to start the year.
Bruce Wacha: Given the soft category trends, we implemented a targeted promotional pricing investment with key retail partners which we subsequently expanded following the supply chain challenges experienced by a competitor.
Bruce Wacha: While this promotional pricing decision temporarily impacted our net sales and P&L in the short term, it allowed us to strengthen our relationships with value customers, while also delivering meaningful price relief to consumers during the challenging period.
Bruce Wacha: With similar pacing trends to overall B&G Foods, our Frozen Investibles business showed sequential monthly improvement during the quarter. Net cells of frozen Investibles decreased only slightly or approximately 1% for the month of March.
Bruce Wacha: Frozen and vegetables then had a strong Easter holiday with April Met Thales up mid-single digits for both our frozen and shelf-stable products
and despite the challenging consumer environment in the U.S.
Bruce Wacha: Our frozen and vegetables business has performed exceptionally well in Canada, driving mid-single digit net sales growth for the first quarter Despite a nearly $2 million negative impact from currency translation into our consolidated results [inaudible]
Bruce Wacha: Net sales for our Crisco brand decreased by $10 million for 15.4% for the first quarter of 2025, as compared to the first quarter of 2024, as the category continues to reset prices and
Thank you so much for having me. Bye.
Bruce Wacha: Approximately half of the decline for Crisco was driven by lower net pricing and product mix and approximately half of the decline was driven by lower volumes.
Bruce Wacha: Gross Profit for overall business was $90.1 million for the first quarter of 2025 or 21.2% of net sales.
Bruce Wacha: Ajusted Gross Profit, which excludes the negative impact of a half a million dollars of acquisition divester related expenses and non-recurring expenses included in our cost of good sold for the first quarter was 90.6 million dollars or 21.3% of net sales.
Bruce Wacha: Gross Profit was $108.9 million in the first quarter of 2024 or 22.9% of net sales.
Bruce Wacha: Ajusted Gross Profit, which excludes the negative impact of a million dollars of acquisition to best related expenses and non-recurring expenses, included in cost of goods sold during the first quarter of 2024, was $109.9 million or 23.1% of net sales.
Michael Lavery, B&G Foods Inc.
Bruce Wacha: Promotional Trade Spend, which is captured in our net sales line, increased by approximately 175 basis points in the first quarter of 2025 as compared to the first quarter of 2024, as we continue to invest in our brand and attempt to reflect lower prices on shelf to consumers.
Bruce Wacha: The increased promotional trade spend drove the majority of the decrease in net pricing in our sales line as well as the majority of the decrease in our gross profit and adjusted the gross profit as a percentage of net sales.
Bruce Wacha: Our material labor and overhead costs when measured against gross sales were essentially flat during the first quarter as compared to the first quarter of last year.
Bruce Wacha: Input cost inflation has measured by raw material costs across our basket of inputs.
Bruce Wacha: and in our factories has remained mostly modest thus far in 2025, outside of some categories such as black pepper, garlic, olive oil, tomatoes, core vegetables, and cans, which have remained elevated.
Bruce Wacha: We are obviously watching closely for any increased signs of inflation throughout the trade and tariff negotiations.
Bruce Wacha: While we haven't yet seen the benefit of more normal or favorable US dollar to Mexican peso exchange rate flows into our P&L this year, we still expect to see some benefit in the back half of the year.
Bruce Wacha: However, currency remains a potential wildcard given the current macroeconomic environment and the political uncertainty regarding tariffs.
Bruce Wacha: Delling General and Administrative Expenses increased by half a million dollars or 1.1% to 49.1 million dollars for the first quarter of 2025 from $48.6 million for the first quarter of 2024.
Bruce Wacha: The increase was composed of increases in acquisition, divestualated, and non-recurring expenses of $4.2 million and general and administrative expenses of $0.5 million
Bruce Wacha: Partially offset by decreases in consumer marketing expenses of $3.3 million and selling expenses
Bruce Wacha: Expressed as a percentage of net sales, selling general and administrative expenses increased by 1.4 percentage points
Bruce Wacha: to 11.6% for the first quarter of 2025 as compared to 10.2% for the first quarter of 2024.
Bruce Wacha: As I mentioned earlier, we generated $59.1 million in adjusted EBITDA, or 13.9% of net sales in the first quarter of 2025, compared to $75 million or 15-8% of net sales in the first quarter of 2024 .
Bruce Wacha: The decrease in adjusted EBITDA's of percentage of net sales was primarily due to our increase investment in promotional trade spent. After removing the impact of trade, adjusted EBITDA margins were more comparable year-over-year.
Bruce Wacha: Net Interest expense remained flat at $37.8 million for the first quarter of 2025 as compared to the first quarter of 2024.
Bruce Wacha: Depreciation and Ammarization was $16.8 million in the first quarter of 2025, which is largely in line with $17.2 million for the first quarter of last year.
We added just a net income of $3.4 million, with four cents.
for adjusted diluted chair in the first quarter of 2025.
Bruce Wacha: In the first quarter of 2024, we had adjusted net income of $14.4 million or 18 cents per adjusted diluted chair
Bruce Wacha: Adjustments to our EBITDA on that income are described further in our earnings release.
Bruce Wacha: I would now like to touch on our results by business unit for the first quarter
Bruce Wacha: Net sales for specialty decreased by $20.3 million or $13.1% in the first quarter of $2,025 to $134.4 million.
from $154.7 million in the first quarter of 2024.
Bruce Wacha: The decrease in specialty segment sales was primarily driven by a combination of lower net pricing and decreased volumes across the specialty business unit in the aggregate.
Bruce Wacha: Specialty segment adjusted EBITDA decreased by $3.7 million, where 9.9% in the first quarter of 2025. The decrease was primarily due to decrease in net sales, which was offset in part by an increase in segment adjusted EBITDA as a percentage of net sales.
Bruce Wacha: Net sales for meals decreased by $13.9 million or $11.6% in the first quarter of 2025 to $106.1 million from $120 million for the first quarter of 2024.
Bruce Wacha: The decrease was primarily due to a decrease in volumes across the meals business unit in the aggregate, coupled with a decrease in net pricing and product mix [inaudible]
Bruce Wacha: Meal Segment Adjusted Evita, decreased by approximately $0.7 million, as lower net sales were largely offset by an increase in Segment Adjusted Evita as a percentage of net sales.
Bruce Wacha: Net sales for frozen and vegetables were down by $11.8 million or $11.2% in the first quarter of 2025 compared to the first quarter of 2024.
Speaker Change: As I mentioned earlier, a significant portion of the decline was driven by the impact of our investments in pricing, increased promotional trade spend, and the timing shift of Easter.
Speaker Change: Meanwhile, frozen vegetables in Canada performed quite well with net sales up mid single digits for the quarter.
Speaker Change: Frozen Investible Segment Adjusted EBITDA was a negative $1.5 million for the first quarter of 2025 compared to $7.8 million for the year ago quarter.
Speaker Change: Approximately $6 million of the decline was driven by increased trade spend that was targeted in temporary and nearly $2 million from increased seasonal pack costs on core vegetable products including corn on the cob and peas. The remainder of the decrease was driven by lower net cells.
Speaker Change: Looking ahead for frozen in-vegetables, we anticipate significant cost improvements in the upcoming production cycle compared to the previous back season.
Speaker Change: We expect these production costs to benefit positively and impact our financial performance beginning in the fourth quarter of this year.
Speaker Change: Net sales for spices and flavor solutions decreased by $3.8 million or 4% in the first quarter of 2025 to $91.7 million from $95.6 million in the first quarter of 2024.
Speaker Change: The decrease was primarily due to a decline in volumes across the spaces and flavor solutions business unit in the aggregate.
Speaker Change: Performance was softer than we typically expect for the portfolio, although our food service and private label brands perform reasonably well for the quarter.
Speaker Change: Spices and flavor solution segment adjusted EBITDA decreased by $2.4 million or $8.4% in the first quarter of 2025, compared to the first quarter of 2024.
Speaker Change: The decrease in segment adjusted EBITDA was largely driven by decreases in net sales, increases in raw material costs such as black temper and garlic, and the negative impact of product mix.
Now moving to our Consolidated Cash Flow and Balance Sheet.
Speaker Change: We reduced our debt to $1.967 billion at the end of the first quarter of 2025 compared to $1.994 billion at the fourth quarter of 2024 and $2.01 billion at the end of the first quarter of 2024.
Speaker Change: While we have no updates on the capital markets front, as a reminder approximately 35% of our long-term debt is tied to floating interest rates or for us so far. A hundred basis point rate reduction would be expected to reduce our interest expense by approximately $7 million.
Speaker Change: Given the soft start of the year and the heightened economic uncertainty, due to, among other things, the ongoing trade and tariff negotiations, we are reducing our fiscal 2025 guidance range.
Speaker Change: We now expect net sales of $1.86 billion to $1.91 billion, Adjusted EBITDA of $280 to $290 million, and adjusted earnings per share of $0.55 to $0.65.
Speaker Change: are updated guidance to counts for a modestly softer economic environment that may impact consumer spending patterns.
Speaker Change: It also reflects our expectation that our top line will continue to stabilize and that our input costs will remain relatively consistent.
In addition, our guidance also assumes [inaudible]
Speaker Change: A cost reduction plan we have implemented will produce approximately $10 million of cost savings during the remainder of the year.
Speaker Change: given the uncertainty in the political economic environment and rapidly evolving negotiations regarding tariffs and retaliatory tariffs.
Speaker Change: Our guidance does not reflect the potential impacts of the recently imposed and threatened tariffs by the US and retaliatory actions taken or threatened by other countries in response or the potential for additional tariffs, trade barriers and retaliatory actions by the US or other countries
Speaker Change: For perspective, more than 90% of our net sales are to customers in the United States and the remainder are primarily to customers in Canada.
Speaker Change: Approximately 80-85% of our products, ingredients, and raw materials are sourced in the United States, Canada and Africa. The majority of our non-north American source products.
Our Source
Speaker Change: From Asian countries, particularly within our spices and flavor solutions business unit.
Speaker Change: such as Black Pepper, which is primarily sourced in Vietnam and garlic, which is primarily sourced in China.
Speaker Change: Many of these imported places are classified as unavailable natural resources, which we believe may ultimately qualify for reduced or zero-tariff rates.
Speaker Change: Additionally, we expect, for full year 2025, interest expense of $147.5 to $152.5 million, including cash interest of $142.5 to $147.5 million.
Depreciation Expensive $47.5 to $52.5 million $1.5 million.
Amiturization Expense of $20-$22M $20-$22M
Speaker Change: An effective tax rate of 26 to 27 percent, and CAPEX of 30 to 35 million dollars.
Casey Keller: Now I'll turn the call back over to Casey for further remarks.
Thank you, Bruce.
Casey Keller: The clothes, B&G Foods continue to remain laser focused on the critical priorities.
Casey Keller: Reshaping the portfolio for future growth, stability, higher margins, and cash flows, as well as structuring key platforms for future acquisition growth
Casey Keller: and reducing leverage below 5.5 times through divestors and excess cash flow to facilitate strategic acquisitions.
Casey Keller: This concludes our remarks, and now we would like to begin the Q&A portion of our call. Operator?
We can now begin the question and answer session.
Speaker Change: To ask a question, you may press star then one on your telephone keypad.
Speaker Change: If you were using a speakerphone, please pick up your handset before pressing the keys.
Speaker Change: If at any time your question has been addressed and you would like to withdraw your question, please press star then do.
Speaker Change: At this time, we will pause momentarily to assemble our roster.
Speaker Change: The first question comes from Michael Lavery with Bipo Sandler, please go ahead
Thank you, good afternoon.
Speaker Change: Michael, just back on some of the sheriff considerations. Can you give us a sense?
Speaker Change: Just for, maybe, how that impacts your potential sale of frozen...
Speaker Change: essentially put it on hold till there's better clarity there. What are some of them? Maybe ripple effects and if the reciprocal tariffs kick in that are on pause or, you know, if the pause tariffs of any kind come through.
Speaker Change: Is there any concerns with things like what that could mean for debt covenants or, you know, I mean, some of the ways we can do the math, the magnitude can get a little big, help us just understand maybe how you're continuously planning and thinking about that.
Speaker Change: Yeah, so part one, we don't typically comment on any ongoing M&A discussions. Obviously, we made a clear the business units under strategic review from a tariff perspective at least with regards.
Speaker Change: to that business. Everything Green Giant World is compliant on their U.S. MCA from a manufacturing in Mexico and moving to the U.S.
Speaker Change: Our Canadian business for Green Giant at least is almost entirely made in Canada, and so there's no real impacts there. You know, obviously like everybody else, we're watching the news.
Speaker Change: and trying to do as best as we can to understand what the implications are and when these negotiations are finished.
Speaker Change: And so just to follow up if they were reinstated or reinstated and you stand up facing the tariffs that are paused but that you could identify
Speaker Change: Can you give a sense of what magnitude that is? Have you been able to put a number on it or help understand what that could look like?
Speaker Change: Yeah, I don't think most people could put a number on it because they change every day. We're watching like everybody else Certainly, you know, we would look at different parts of our business and have an understanding of you know What the competitive set looks like but it's hard to predict where tariffs are going to go right now
As we talked in the script [inaudible]
Speaker Change: in our comments that the largest, you know, potential risk is in our Spice's business.
You know, coming from China, Southeast Asia, Vietnam, etc.
Speaker Change: That's the biggest rest. Some of those are on pause. China is obviously in negotiation.
Speaker Change: So those are the ones we just can't predict. What is the final grade in China? We don't know. You know, it was it was as high as 150% at one point. Now it's come down. So the risk is significant. But you know, we're confident that negotiations will continue and
Speaker Change: that the things on pause will be negotiated as well. We know there's a lot of programs of Vietnam, etc. So...
Speaker Change: I mean, honestly, from a Mexico standpoint, we're not that worried because, you know, it appears that as long as your NASA or USMCA compliant [inaudible]
that we should be fine.
Speaker Change: Going forward and so I don't think that will have any real any major impact on our green giant business and the other thing to keep in mind with our spice business. [inaudible]
Speaker Change: is virtually everybody that buys the products that we manufacture and spice whether it's garlic or black pepper. They're buying from the same regions and so that would be kind of an industry phenomenon rather than a unique B&G sourcing phenomenon.
Casey Keller: Okay, that's helpful color. I'll pass it on thanks. Thank you
Speaker Change: Our next question comes from Robert Moskow with TD Kevin. Please go ahead.
Robert Moskow: Hi, good afternoon. So the stock reaction today was more dramatic than I expected, and I'm just [inaudible]
Robert Moskow: has led to any kind of discussions internally about accelerating your portfolio changes or accelerating
Robert Moskow: programs. I know it's only 12 hours of reaction, but wanted to get your reaction, please.
Thank you.
Speaker Change: Honestly, we were already accelerating. I mean, this isn't news to us today. I mean, we were already looking at how do we accelerate our portfolio shaping efforts and we've been working pretty diligently on that. You know, I honestly can't comment on it, but that's been a major focus for us too.
Speaker Change: Make the changes in the portfolio that we think are necessary for the long term and what I talk today about the cost reduction efforts, you know 10 million this year, run rate of 15 to 20 million. We've been working on that for, you know.
Speaker Change: a few months now to get those implemented this year and you know we've got
Speaker Change: We were already trying to drive those pretty fast and hard, so today gives me more conviction that we've got to move those things as fast as possible, but we were already doing that. We were already pushing the accelerator on both those efforts pretty hard.
Speaker Change: Okay. And I guess the only other thing I would say, Rob, is that the other piece of this is as we reshape the portfolio, we will take some pretty significant actions to right size our cost structure.
Speaker Change: as we invest businesses. So that's another effort that's in that's being planned that's probably part of a larger restructuring.
Speaker Change: Got it and I wanted to try to drill down to the negative 2% you called out in April as a consumption trend. Is that a clean number or are there any Easter elements that? Make it maybe stronger because of the later Easter?
Speaker Change: Yeah, I think there's maybe a little bit of Easter help in that number, but I think even the underlying number before Easter benefits is improving versus what we're seeing in the early part of the first quarter and then towards the end of last year in the fourth quarter. [inaudible]
Speaker Change: So we are seeing some improvement in that trend. You know, it's it's gradual and I don't we really didn't expect a significant change because we don't laugh the you know sort of the negative comms till the middle of the year.
Speaker Change: We were expecting a lot of change, but it's encouraging us what we're seeing a little bit of light in the consumption trends, but we need to see more. We need to see it continue.
Speaker Change: Okay, I have one more. The 50 million of inventory de-load, the vast majority of that happened in January or was it kind of right out? I think I said 15, 15, just to make it clear, 15, 15, yeah.
Speaker Change: I would say most of that occurred in January at the end of the month.
and some of it in February .
Speaker Change: We saw our volumes, our shipments pretty low in the very end of the month in January .
Got it. Okay, thanks so much. Yep, thanks Rob.
Speaker Change: The next question comes from Scott Marks with Jeffries, please go ahead
Scott Marks: Hey, good afternoon guys. Thanks so much for taking our questions. The first thing I wanted to ask about is this retailer inventory reduction? Is there any expectation of recouping some of that loss volume? Whether it's during the Easter period or later in the year?
Speaker Change: I don't think so. You know, I think this was a, you know, permanent reduction, you know, we typically see
Scott Marks: Some of this, you know, reduction from the fall period happened more gradually than it did this year. We could see maybe some smoothing out of that effect this year, but I mean our assumption right now is that they've taken the weeks down and 80% of that will stick.
Scott Marks: as they try and operate more efficiently and operate with lower inventories, just like we're doing.
Scott Marks: So it was a little bit of a surprise to us in terms of what happened and how much they took out.
Scott Marks: But I think our operating assumption right now is that they're trying to be more efficient and we need to kind of plan that those inventory reductions are largely permanent or they will operate with more weeks to supply and maybe some of it will come back but just a small portion.
Scott Marks: Got it. And then I think there was also a comment that you made in the parable marks about, you know, about kind of...
Scott Marks: fully lapping this changing consumer behavior at some point. I think we kind of heard thoughts from others around the industry that this would have happened a bit sooner after the initial kind of inflationary shock from a couple of years ago. So just curious if you can kind of speak to maybe, you know, what kind of gives you that, that, you know.
Scott Marks: Confidence that that that can happen because I think more recently we've heard about some declining consumer sentiment from some of your peers So just trying to gauge how you're thinking about the consumer right now and when maybe some of those behaviors will will shift back. Thanks. I don't think there's a point in time where we're going to be able to do that.
Scott Marks: We laugh everything, all consumer behavior, I think it's been a, it's kind of, it'll be a gradual process but what we see in our own brands and categories and obviously our categories operate differently, you know, particularly Chris go with prices moving up and down quite a bit.
Scott Marks: We believe that we're lapping the larger negative comps in our business and categories in the middle of this year, so call it the start of the third quarter.
Scott Marks: And that we're looking at that and saying, is that kind of a demarcation when we begin to see?
Scott Marks: Less negative comes because we're already lapping the first round of consumer behavior changes and everything else so we're gonna watch this pretty closely
Scott Marks: You know, it's encouraging to me, we're seeing a little bit of signs in our recent, you know, weeks that maybe we've, you know, maybe that some of the declines will begin to lessen.
Scott Marks: But it's that simple. It's like looking at kind of the era of your trends and wonder we hit those points where we saw some significant declines. But I don't think it's a point in time. I think it's a
Scott Marks: It's phased in terms of different categories and when people reacted to different price points and when prices actually changed in different categories.
Got it. Thanks for the thought. So pass it on. Yeah.
William Reuter: Our next question comes from William Reuter with Bank of America. Please go ahead.
William Reuter: Hi, good afternoon. I've got just a couple of questions. The first on your ABL, are there any constraints on your ability to borrow the full amount based upon the credit agreement, covenants, or do you have access to the entirety of it?
Speaker Change: so it's a it's actually not an ABL it's a cash flow revolver
Sorry, yes, I said that wrong.
Speaker Change: So if you think about sort of the way those two work, the ABL we're going to be limited by eight.
Speaker Change: with our inventory, etc. Here we've got some confidence, but we also are less reliant on our revolver today than we were in the past around working capital, following the sale of the Green Giant Cannes Business.
Speaker Change: So we'll still have some swings around the holidays but not nearly as big and then separately really that revolver was sized for acquisition so I wouldn't anticipate fully drawing on that revolver unless we were buying software.
Okay, can you share what's available today?
Speaker Change: I mean, it's a couple hundred million dollars drawn at the $475 million Revolver.
Speaker Change: Right, okay. And then with regard to the timing of the late January reductions of inventory, I think a lot of retailers reset their shelves around that period of time. Were there any shelf-based losses as part of those reset?
Speaker Change: We don't really see, you know, a specific point in time to do multiple categories, so no, it was really around how are they managing their weeks of supply. There are some resets.
Speaker Change: One or two in our categories in March, but I don't think that was really the impact. It was, you know, making some decisions to...
Speaker Change: Pull down inventory on categories and run with lower love supply and maybe even take out seasonal merchandising from the fall.
Casey Keller: Seas on the inventory faster than you typically see. As Casey said, our commentary is more around destocking rather than reset, which impacted up.
Casey Keller: Got it. And then just lastly, the decision to promote a little bit more, I mean, was that decision?
Casey Keller: based upon either retailers that were going to reduce your self space or maybe that given these elevated promotions that you've gained more, can you talk a little bit about the decisions, make the promotions that clearly hit even in the quarter?
Casey Keller: I mean, it's largely in the green giant frozen business and number one, I think we determined that we needed to get sharper price points and promotions to be competitive.
Casey Keller: in the category because we saw other people promoting and being more aggressive and so we decided to respond.
Casey Keller: to be able to do that. And we also felt that we needed to make sure that our volumes were moving more quickly and our velocities were increasing and we saw that happen.
So, this was really a decision to...
Casey Keller: Make sure that we're competitive, make sure that our business was healthy. And as I said it was a short term decision in that period of time that you know now we've
Casey Keller: Kind of pulled back on some of those training investments, but I'm encouraged that our actual art business on the U.S. Frozen net sales was up.
Casey Keller: positive in April after we pulled back on the trade investment. So some of that was eats merchandising but we've continued to see good trends on that business. But we made a short-term decision to get competitive against you know some pretty aggressive promotion activity.
Casey Keller: We suffered a little bit in the fourth quarter, probably by not responding aggressively enough and we did that in the first quarter and as I said, I'm encouraged by the trends as we pull back that training investment that our business is healthy. Thank you very much.
Got it. Alright, that's all very helpful. Thank you Thanks so much.
Thank you.
Speaker Change: Again, if you have a question, please press star, then 1.
Speaker Change: Our next question comes from Karru Martinson with Jeffries. Please go ahead.
Speaker Change: Hi, thanks for taking my question. This is the bestiana on for Karru. On this frozen and vegetable segment, what will be the run rate for promo moving forward and with the pressures that you see in green giant? Has that branched performance influenced how you and your potential suitors are looking at valuations?
Casey Keller: So, again, from an M&A standpoint, we wouldn't comment on that as far as promotional run rate. As Casey said, we leaned in a little bit harder in the first quarter just given the challenging backdrop from a category standpoint. We think that we have really good performance from a top line in response to that, particularly in March.
Casey Keller: and April . But we don't necessarily disclose our promotional rates or keys and so on to go forward bases.
Casey Keller: I think we will resume our normal kind of trade promotion spending rates.
Casey Keller: You know, for the remainder of the year, you know, this was, you know, investment we put in to be competitive but we're feeling like, you know, right now our plans are competitive.
Thank you.
Thank you.
This concludes our question and answer session and our conference.
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