The Simply Good Foods Company Q2 FY2026 earnings call

Joe Scalzo mentioned being disappointed with Q2 performance, fiscal year 2026 guidance adjusted, and the company is acting with urgency. Chris Buehler discussed Q2 results in detail, balance sheet and cash flows, and updated outlook. Joe emphasized the company's position in a trend right consumer category, strong brand portfolio, and best-in-class company capabilities but also structural issues in the business. Plans include attacking inefficiency in supply chain, using pricing action, lowering fixed overhead structure, restoring brand investment, and focusing on ROI for marketing investments. Brand portfolio discussions include Quest focusing on re-accelerating growth in Bars, Atkins resetting retail baseline and evaluating future investments, Owen undergoing distribution reset and refocusing on marketing.

Second quarter net sales were $326 million, down 9.4% year over year. Adjusted EBITDA was $55.5 million, down 18.4% year over year. Gross profit was $103 million, down 20.8% year over year. Gross margin was 31.6%, down 460 basis points year over year. Quest consumption grew 2.4%, Salty grew 14% but decelerated from Q1, Owen consumption was down 2.4% due to lapping heavy promotional period and poor base velocities including new distribution, Atkins consumption declined 23.4% due to distribution losses and trade inventory reductions. Quest is a billion-dollar retail brand, Atkins is a leading weight management brand, Owen is an entry into plant-based protein segment. Quest Bars consumption weakened, Atkins is resetting retail baseline, Owen is undergoing distribution reset.

Fiscal year 2026 net sales expected in range of $1.31 to $1.35 billion, adjusted EBITDA $217 to $225 million. Third quarter net sales expected $328 to $339 million, adjusted EBITDA $46 to $50 million. Outlook assumes current economic conditions, consumer behavior, and tariff rates remain generally consistent. Expect sequential improvement in gross margin change including Q4 margin expansion. Marketing spend held at planned levels. Expect progress on gross margins in fiscal 2027 depending on inflation, and fixed cost reduction program savings in Q4.

Executional challenges against dynamic and highly competitive marketplace, impact of GLP-1 medications on consumer eating habits and category dynamics, potential for continued distribution losses for Owen, uncertainty in economic conditions and inflation affecting financial performance, reliance on price promotion with poor return and message to consumers about brands, and potential for ongoing issues with product quality and marketing execution affecting brand performance.

Q: Joe, you outlined strategic priorities including addressing cost structure, are there structural reasons the aspirational financial structure is no longer the right benchmark?

A: Part of fundamental issue is household metrics moving in wrong direction based on strategic choices and investment decline, rebuilding financial structure is paramount to investing in brands.

Q: When thinking about phasing of cost structure opportunity, expecting progress into fiscal 27?

A: Intent to make progress in 2027, depends on inflation, and reducing reliance on price promotion to free up dollars.

Q: Megan Clapp asked about reconciling impairment charges and confidence in getting back to long-term algo, A: Confident in good category, strong company, and right portfolio, but choices and execution needed.

Q: Robert Moscow asked about COCO cost deflation benefit and G&A percentage, A: COCO savings still expected in Q4 but whey cost up, G&A expected to be around 10% range.

Q: Steve Powers asked about root cause of slowing base velocity in Quest chips and bars, A: Refocusing on core, repositioning brand, and improving innovation and execution.

Q: Jim Solera asked about resource allocation across brands and marketing spend, A: Focus on ROI, prioritize brands with best return, and marketing spend around 10% until ROI justifies more.

Q: Alexia Howard asked about guidance for second half and sales growth by brand, A: Reflecting Q2 results and distribution losses for Owen.

Q: John Baumgartner asked about Atkins alignment with GLP-1 and staffing reductions, A: Atkins resetting retail baseline and investigating GLP-1 alignment, staffing reductions due to unfortunate pacing of investment.

Q: John Anderson asked about reset timeline and capital allocation, A: Reset timeline cloudy, but moving forward on strategies, and considering buybacks as good option for excess cash