MARZETTI CO Q2 FY2025 earnings call

• Dave Ciesinski noted record highs in net sales, gross profit, and operating income for fiscal second quarter. Retail segment saw growth from licensing and own brands, while foodservice segment grew due to core national chain demand. - Tom Pigott discussed financial results: consolidated net sales up 4.8% to $509.3M, gross profit up $11.3M or 9.3%, operating income up $9.9M or 15.1%. Mentioned pension settlement charge of $14M, tax rate of 22.5% for quarter (estimated 23% for remainder of fiscal '25), diluted EPS decreased $0.09 to $1.78. Capital expenditures forecast $70M-$80M for fiscal '25, and returned funds to shareholders with $0.95 per share dividend. - Discussed acquisition of Atlanta-based manufacturing facility, expecting to complete in current quarter, which will benefit sauce and dressing operations with improved efficiency and capacity.

Retail Segment: Net sales increased 6.3%, driven by volume growth from licensing (strong demand for Texas Roadhouse dinner rolls, Buffalo Wild Wing sauces, Olive Garden dressings, Chick-fil-A sauces) and own brands (Marzetti branded Carmel dips, refrigerated dressings, New York Bakery garlic bread, Sister Schubert). Excluding perimeter of the store bakery lines exited in March, retail segment net sales increased 8.4% and volume in pounds shipped grew 7.4%. In frozen dinner roll category, Sister Schubert and Texas Roadhouse brands combined to grow 15.9% with 60.8% market share. Marzetti produce dressing grew 1.4% with 30 basis points market share increase, and produce dips advanced 2% with 110 basis points market share gain. New York Bakery garlic bread grew 2.8% adding 40 basis points market share to 41.7%. Buffalo Wild Wings sauces up over 11%, Chick-fil-A sauces up 1.1%, Olive Garden dressings up 3.3%. Foodservice Segment: Net sales grew 3% led by higher demand from core national chain restaurant accounts. Volume in pounds shipped advanced 1.5%. Consolidated: Net sales increased 4.8% to $509 million, gross profit improved 9.3% to $133 million, operating income grew 15.1% to $76 million.

• Fiscal 2025 total capital expenditures forecasted to be $70 million to $80 million. - Tax rate for the remainder of fiscal '25 estimated at 23%. - Retail sales outlook mid to low single-digit growth depending on consumer behavior. - Foodservice segment expected to be flattish but poised to recover as industry traffic improves. - Anticipated completion of acquisition of the Atlanta-based manufacturing facility in the current quarter (ending March 31).

• Risks related to U.S. economic performance and consumer behavior impacting demand. - Commodity cost inflation/deflation uncertainties. - Impact of pension plan termination, including the $14M non-cash pension settlement charge.

Q: Jim Salera asked about the performance of retail license products and if retail sales should continue to accelerate.

A: Dave Ciesinski said Texas Roadhouse rolls, Buffalo Wild Wing sauces, Olive Garden, and Chick-fil-A sauces contributed to growth, and outlook is mid to low single-digit growth depending on consumer.

Q: Alton Stump asked about Texas Roadhouse and Foodservice new products.

A: Dave Ciesinski discussed Texas Roadhouse rolls' performance and Foodservice expected to recover as industry traffic improves.

Q: Brian Holland asked about gross margin outlook and Atlanta facility benefits.

A: Tom Pigott said modest deflation in quarter, second half expected flat on commodities; Dave Ciesinski discussed Atlanta facility providing cooked/non-cooked capacity and packaging options, with margin accretion expected over time.

Q: Scott Marks asked about gross margin and Lancaster owned brands.

A: Dave Ciesinski talked about margin trends due to ERP implementation, construction completion, and focus on productivity; discussed New York Bakery, Sister Schubert, and Marzetti brands' performance.

Q: Andrew Wolf asked about Texas Roadhouse retail presence and pension plan.

A: Dave Ciesinski said Texas Roadhouse rolls will expand to more states and channels; Tom Pigott mentioned modest savings from pension plan termination in fees and administrative costs.