The Marzetti Company Q2 FY2026 earnings call

Business Update: Announced acquisition of Bachan's, a Japanese American barbecue sauce brand, for ~$400 million cash. Consolidated net sales up 1.7% to $518 million; adjusted net sales up 0.1% to $510 million. Gross profit grew 3.4% to $137 million.

Financial Results: Gross profit grew due to productivity program offsetting commodity costs. SG&A expenses increased 5.8% due to higher marketing spend. Restructuring and impairment charges totaled $1.7 million. Diluted earnings per share increased $0.37 to $2.15. Capital expenditures for the quarter were $17.7 million, with forecasted total capital expenditures for fiscal 2026 between $75 million and $85 million. Dividend increased 5% to $1 per share, and $20.1 million in common stock repurchased.

Strategy and Outlook: Three growth pillars: accelerate core business, simplify supply chain, expand core via M&A and licensing. Acquisition of Bachan's aligns with evolving consumer preferences, expected to be accretive to top-line and gross margins starting year one.

In the fiscal second quarter, consolidated net sales increased 1.7% to $518 million. Excluding non-core sales from a temporary supply agreement, adjusted net sales rose 0.1% to $510 million. Gross profit grew 3.4% to $137 million.

Retail segment: Net sales declined 1.1%. Highlights include continued growth in New York bakery frozen garlic bread, expanding distribution for Texas Roadhouse dinner rolls. Sercana scanner data showed 2.3% overall scan sales. Frozen garlic bread: New York bakery grew 8.4% to 44.6% market share. Frozen dinner rolls: Sister Schubert's and Texas Roadhouse combined grew 7.1% to 60.8% market share. Shelf-stable sauces: Chick-fil-A sauces grew 6.7% with 13 basis points share growth. Produce dips: Marzetti brand grew 0.3% to 75.5% market share.

Foodservice segment: Excluding non-core TSA sales, adjusted net sales grew 1.6%, but volume shipped declined 0.4%. Gross profit increased 3.4% to a record $137 million.

Back Half of Fiscal Year: Excluding acquisition impact, retail sales expected to benefit from expanding licensing program (Texas Roadhouse Dinner Rolls) and innovation. Anticipate retail segment sales pull forward due to earlier Easter. Foodservice segment expects continued growth from select national accounts. Expect modest input cost inflation to be offset by contractual pricing and cost savings. Acquisition Impact: Acquisition of Bachan's expected to be accretive to top-line and gross margins starting year one.

Risks associated with forward-looking statements, including actual results differing from projections. Impact of US economic performance and consumer behavior on product demand. Input cost inflation and supply chain challenges.

Q: Scott Marks on retail performance and go-forward outlook A: Dave Ciesinski noted retail had a strong comp last year, saw softer demand during government shutdown, but rates recovered. Expected low single-digit volume growth going forward.

Q: Scott Marks on foodservice segment volume decline A: Dave Ciesinski said industry was flat, some pullback during shutdown, but normalization seen. Most large national accounts performing well, specialty sauce promotions contributed, expecting modest improvement ahead.

Q: Todd Brooks on Bachan's acquisition details A: Dave Ciesinski discussed Bachan's growth, alignment with consumer preferences, expected synergies, and plans to leverage Marzetti's capabilities.

Q: Todd Brooks on Texas Roadhouse dinner rolls exit run rate A: Dave Ciesinski said Texas Roadhouse dinner rolls had ~20% growth, $20 million run rate, with potential to reach $100 million run rate with continued distribution growth and product extensions.

Q: Alton Stump on share buybacks and Bachan's distribution potential A: Tom Pigott said share buybacks were opportunistic, now focusing on attritional approach. Dave Ciesinski discussed Bachan's distribution potential in US, Canada, and broader adjacencies, with high velocities and net promoter score.

Q: Brian Holland on Bachan's integration and synergies A: Dave Ciesinski said Bachan's is co-packed, plans to integrate manufacturing, with immediate margin accretion and potential for supply chain synergies.

Q: Jim Salera on Bachan's co-manufacturing and 3Q outlook A: Dave Ciesinski said Bachan's is high margin, potential for foodservice opportunities. Tom Pigott noted retail expected low single-digit growth in second half, fairly even by quarter.