WESTERVILLE, OHIO — Sales gains in the company’s New York Bakery frozen garlic bread and the continued success of its licensing program lifted earnings and sales at Lancaster Colony Corp. in the second quarter. The company also benefited from higher demand from select quick-service restaurant customers, which provided a spark to performance in the foodservice segment.

Net income at Lancaster Colony in the second quarter ended Dec. 31, 2022, was $39.97 million, equal to $1.45 per share on the common stock, up 16% from $34.37 million, or $1.25 per share, during the second quarter of fiscal 2022. Net sales were $477.39 million, up 11% from $428.43 million.

Thomas K. Pigott, chief financial officer, told analysts during a Feb. 2 conference call that second-quarter results reflected improved fundamentals in three areas.

“First, both of our segments have eliminated lower profit businesses and SKUs,” Mr. Pigott said. “Second, through improved planning, scheduling and tactical execution, factory headcount was down for the quarter versus the prior-year quarter. Third, inventory days on hand are down versus the prior-year quarter, and our mix of inventory is better aligned with demand trends. These items, along with a more stable and predictable operating environment, helped to improve gross profit and significantly improve our cash flow performance.”

Operating income in the company’s Retail segment totaled $49.35 million in the second quarter, down narrowly from $49.61 million in the same period a year ago. Net sales increased 6% to $258.76 million from $245.09 million.

“Retail segment sales volumes measured in pounds were up 3.8% in the period due to price elasticity as anticipated, along with the impact of our decision to exit some less profitable product line in fiscal 2022,” said David A. Ciesinski, president and chief executive officer. “IRI data for the second quarter showed very strong performance for our (marquee) retail brands. Sister Schubert’s, leading share of the frozen dinner roll category increased 140 basis points to 55.4%. Marzetti share of the refrigerated salad dressing category added 110 basis points to 23.7%. And New York Bakery’s leading share of the frozen garlic bread category grew 90 points to 43.1%.”

In the Foodservice segment, operating income rose 46% to $26.7 million from $18.31 million. Sales also increased, climbing 19% to $218.63 million from $183.34 million.

Looking forward, Mr. Ciesinski said Lancaster will continue to ramp up production in the newly expanded section of its dressing and sauce facility in Horse Cave, Ky., which is the largest facility in the company’s manufacturing network.

“In the back half of our fiscal year, SG&A costs will reflect increased investments in our business, including higher levels for spend on consumer promotions,” he said. “We will also continue to monitor economic conditions for any potential impact on our Foodservice business.”

Providing an update on Project Ascent, the company’s ERP initiative, Mr. Ciesinski said Lancaster completed the second wave in October 2022 and is in the early days of the third wave of implementation. As part of the third wave, Lancaster is adding the Horse Cave plant to the new system.

“During the implementation phase, we will have this facility down for four days as part of the cutover process,” he said. “Our third-quarter financial results will reflect the incremental costs associated with this temporary shutdown.”