TreeHouse Foods forecasts lower 4Q results
OAK BROOK — TreeHouse Foods Inc. Friday announced that lower-than-anticipated December sales volumes will result in fourth quarter adjusted earnings.
The earnings are expected to be between 84 to 87 cents per fully diluted share, representing a 7 percent increase compared to 80 cents per fully diluted shares for the 2010 fourth quarter.
The company’s fourth quarter retail channel volumes decreased 4 percent, mainly due to an 8 percent decline in December volumes, well below historical levels. As a result, the company’s 2011 full year adjusted earnings are now expected to be between $2.70 and $2.73 per fully diluted share compared to the company’s previously-issued guidance of $2.90 to $3.00 per fully diluted share.
The company believes the volume decline was driven by three main factors that include reduction in consumer food purchases, sales shift away from traditional grocery customers toward alternate channel retailers and negative effect of warm weather in the Midwest and Northeast on seasonal sales.
In the last four and 12 week periods of 2011, consumers significantly reduced food purchases within measured channels, as evidenced by industry data indicating branded food volume declines of 5.9 percent and 5.3 percent respectively.
Similarly, private label sales also decreased, but at lesser rates of 3.7 percent and 1.7 percent, respectively.
The company saw a meaningful shift in its sales from traditional grocery customers toward alternate channel retailers such as club stores, limited assortment stores and dollar stores. In the fourth quarter, sales to traditional retailers declined in the high single digits, while sales to alternate retail channels were up double digits. As a result, the shift toward sales of opening price point items and smaller pack sizes in the quarter resulted in a negative impact on margins.
Seasonality: Total volume of the company’s key cold weather products of soup, nondairy creamers and hot cereal posted declines in comparison to December 2010. Independent research shows that across the total spectrum of measured channels, December unit volumes were lower than the prior year in all three categories: soup fell 8.8 percent, nondairy creamers declined 4.7 percent and hot cereal was down 4.6 percent..
“Given our solid top line growth earlier in the year, we were surprised by the sudden decrease in December volumes. Although our sales teams did an outstanding job in 2011 recovering pricing and bringing in new business in line with our expectations, the combination of consumer purchase behavior, retail channel shifts and abnormal seasonality adversely affected our results in the quarter,” said Sam K. Reed, Chairman, President and CEO of TreeHouse Foods.
The company’s preliminary total fourth quarter revenue grew 5 percent to approximately $535 million compared to the 2010 fourth quarter revenue of $510 million.
“Having struggled throughout 2011, we believe that we will overcome this setback and resume steady growth in the year ahead. To this end, we are off to a promising start at midmonth with retail grocery private label shipments and orders up approaching double digits over January of last year,” Reed said.
“All of us at TreeHouse remain firmly committed to generating long-term shareholder value,” he added.