LENEXA, KAN. — Citing innovation, the back-to-school occasion and retail shelf resets, executives at Hostess Brands, Inc. held an optimistic outlook for the remainder of this year during a conference call with analysts to discuss the second quarter ended June 30.
The company slightly reaffirmed its full-year guidance for net revenue growth of 4% to 6%, while adjusted EBITDA and adjusted EPS guidance were toward the higher end of its previous $315 million to $325 million and $1.08 to $1.13 guidance ranges, respectively.
After a retreat in unit sales volume and a loss of market share experienced in the first quarter of this fiscal year, executives expressed confidence in Hostess’s foothold when it comes to new product innovation and the fall back-to-school snacking category.
“Hostess Brands delivered another strong quarter with double-digit profit growth and higher margins driven by favorable net price realization, normalizing supply chain and contributions from productivity initiatives,” said Andrew P. Callahan, president and chief executive officer. “Our foundation for sustainable growth remains strong. We are executing well against our growth initiatives with strong customer support behind back-to-school merchandising, leading innovation in the category, and increased investment in our brands, which provide confidence in our ability to generate stronger sales growth in the second half of 2023.”
Mr. Callahan noted the launch of Kazbars, Old Fashioned Donettes and Chocolate Baby Bundt Cakes during the first half of this year as early drivers for the company’s innovations that are driving “high velocity” consumer traffic on store shelves.
Second-quarter net income for the period ended June 30 was $32.5 million, equal to 24¢ per share on the common stock, up 6.6% from $30.5 million, or 22¢, in the second quarter last year. Sales were $352.4 million, up 3.4% from $340.5 million.
Adjusted net income was $37.7 million, with adjusted earnings per share up 6¢ to 28¢ from the same quarter in 2022. According to the company, favorable price/mix provided 10.4% of the net revenue growth driven by net price realization, offset by a 6.9% decline from volume.
The company also cited potential in its Voortman Cookies brand, which shifted its wafer marketing strategy from highlighting “sugar-free” to “Zero Sugar,” a rebrand Hostess said will help the wafer appeal to new demographics.
“Our Nielsen-measured Sweet Baked Goods point of sale increased by 2.9% for the 13-week period ending July 1, while our US cookie point of sale increased by 7.2% in the period, both lapping last year’s strong growth,” said Travis Leonard, executive vice president, chief financial officer and principal financial and accounting officer. “On a two-year stacked basis, our Sweet Baked Goods retail sales were up 18.5% in the quarter, and Voortman growth was even stronger at 32.2%, driven by our continued momentum in the Zero Sugar subsegment.”
Capital expenditures in the second quarter were $58.2 million, including the construction of the new Arkadelphia, Ark., facility, which remains on track to begin operations in the fourth quarter.“The number of snacking occasions throughout the day continues to increase, and consumers are seeking out a wide range of options as they increasingly adopt a balance sheet approach when making decisions on what to snack on from savory to sweet, from nutritional to rewarding, and from mindful to indulgent,” Mr. Callahan said. “We have a deep understanding of these occasions and continue to refine our strategy focus on five of the fastest-growing occasions with an addressable market of more than $65 billion in retail sales and more important, where we believe our portfolio has a strong right to win.”