WESTERVILLE, OHIO — While the company ended the year on a soft note, Lancaster Colony Corp. executives said factors weighing on results at the end of fiscal 2023 were in the rear-view mirror and that the business is poised for growth in the year ahead.
Encouraging factors cited by David A. Ciesinski, chief executive officer, include “positive momentum for the company’s New York Bakery frozen garlic bread” and volume growth in Foodservice led by increased business with certain quick-service restaurant and national chain restaurant accounts.
For the year ended June 30, Lancaster Colony net income was $111.3 million, equal to $4.04 per share on the common stock, up 24% from $89.6 million, or $3.26 per share, in fiscal 2022. Net sales were $1.82 billion, up 9% from $1.68 billion a year earlier.
Results in both years were adversely affected by special charges, most notably Project Ascent (the company’s enterprise resource planning initiative) as well as restructuring and impairment charges. Combined, the special items reduced fiscal 2023 net income by $42.3 million and fiscal 2022 net income by a net $54.3 million. Excluding these items, net income in fiscal 2023 was up 8% from the year before.
Lancaster Colony said the year-to-year sales comparison was skewed by $25 million in incremental net sales in the final quarter of fiscal 2022, ahead of the company’s July 1 ERP go-live date.
“Fourth quarter gross profit results fell short of our expectations as we experienced some transitory costs associated with our long-term strategic investments in production capacity and our ERP network,” Mr. Ciesinski said. “These issues have now been remedied, and we look forward to the many benefits these investments will provide our business in the years ahead.”
Net income in the fourth quarter was $9.2 million, or 33¢ per share, down 68% from $29 million, or $1.06, in the fourth quarter last year. Sales were $454.7 million, up 0.5%. Results in the fiscal 2023 fourth quarter included a $25 million charge reducing the carrying value of the company’s Flatout, Inc. flatbread business. A year earlier, the company had charges of $10.5 million, most of which was from a reduction in the carrying value of Angelic Bakehouse.
The company said profits were pressured by startup costs at a dressing and sauce plant at Horse Cave, Ky.; ERP implementation challenges and costs associated with a retail product line that was discontinued.
“Looking ahead to fiscal 2024, we anticipate Retail segment sales will benefit from volume growth led by our licensing program, including incremental growth from the new products, flavors and sizes we introduced in fiscal 2023,” Mr. Ciesinski said. “We are also excited to share our plans to add Texas Roadhouse steak sauces to our licensing program with a spring launch date. In addition, we foresee continued positive momentum for our New York Bakery frozen garlic bread products. In Foodservice, we expect sales volumes to be led by growth from select quick-service restaurant customers in our mix of national chain restaurant accounts, while external factors, including US economic performance and potential changes in consumer sentiment, may impact demand. Consolidated net sales will also continue to benefit from the pricing actions taken in fiscal 2023.
“We project the impact of inflationary costs to subside notably in the coming year. The pricing actions we have implemented along with our cost savings initiatives will help to offset remaining inflationary costs. With respect to our ERP initiative, Project Ascent, we completed the final wave of the implementation phase as planned and will devote our attention to leveraging the new system to strengthen our execution in fiscal 2024.”
Commenting during an Aug. 23 call with investment analysts, Mr. Ciesinski said that excluding the advanced ordering ahead of the ERP launch, retail sales volume rose 1.7% in the fourth quarter from the year before. Retail sales volume was up 4.7% during the fourth quarter, largely thanks to the company’s licensing program (products such as Chick-fil-A, Olive Garden and Buffalo Wild Wings sauces and dressings).“Circana data, formerly IRI, showed notable share gains in the quarter for our category-leading New York Bakery and Sister Schubert brands. New York Bakery’s leading share of the frozen garlic bread category grew 180 basis points to 42.3%, and Sister Schubert’s leading share of the frozen dinner roll category increased 200 basis points to 56.1%, Mr. Ciesinski said.