TreeHouse Foods lowers full-year earnings guidance

by Keith Nunes
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OAK BROOK, ILL. — TreeHouse Foods, Inc. said its full-year earnings are now expected to be in the range of $2.70 to $2.73 per fully diluted share, lower than the company’s previously issued guidance of $2.90 to $3 per share. The company identified smaller-than-expected December sales volumes as the reason.

“Given our solid top-line growth earlier in the year, we were surprised by the sudden decrease in December volumes,” said Sam K. Reed, chairman, president and chief executive officer of Tree House Foods. “Although our sales teams did an outstanding job in 2011 recovering pricing and bringing in new business in line with our expectations, the combination of consumer purchase behavior, retail channel shifts and abnormal seasonality adversely affected our results in the quarter.”

The company said it saw a meaningful shift in its sales from traditional grocery stores toward alternate channel retailers such as club stores, limited assortment stores and dollar stores. In the fourth quarter, sales to traditional retailers declined in the high single digits, while sales to alternate retail channels were up double digits. As a result, the shift toward sales of opening price point items and smaller pack sizes in the quarter resulted in a negative impact on margins, according to the company.

For the fourth quarter, the company said it expects earnings per share to be in the range of 84c to 87c per fully diluted share.

“We are disappointed in our finish to the year, especially after engineering a mid-year recovery in our private label revenues and margins,” Mr. Reed said. “Our turnaround was derailed by a sudden drop in volume that affected TreeHouse and the whole of the packaged foods industry, as consumer purchases of shelf stable dry groceries for the fourth quarter showed their sharpest decline in six years. Having struggled throughout 2011, we believe that we will overcome this setback and resume steady growth in the year ahead. To this end, we are off to a promising start at mid-month with retail grocery private label shipments and orders up approaching double digits over January of last year.”

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