Simply Good Foods Q3 Highlights: 2.6% Sales Growth, Earnings Beat, Margin Pressure & More

Simply Good Foods Company's SMPL third-quarter FY23 sales increased 2.6% year over year to $324.79 million, beating the consensus of $321.38 million. Adjusted EPS of $0.44 surpassed the consensus of $0.41.

Gross profit was $119.25 million, with a gross margin contracting 80 basis points Y/Y to 36.7%.

Net price realization was about an 8.0 percentage point contribution to net sales growth, and core volume was off about 4.1 percentage points. 

North America and International net sales increased 2.6% and 1.9%, respectively, versus last year.

Also Read: Opportunity For M&A Seen In Simply Good Foods' Low Leverage Ratio, Analyst Points Out

Operating expenses rose 2.6% Y/Y to $65.04 million. 

In the third quarter of fiscal 2023, the company reported net income of $35.4 million compared to $38.8 million in the year-ago period.

The company exited the quarter with cash and equivalents worth $68.79 million. 

During the third quarter of fiscal 2023, the company repaid $40.0 million of its term loan debt. 

On May 27, 2023, the outstanding principal balance of the debt was $325 million.

"We are confident in the strength of our business and diversification of our portfolio across brands, forms, customers and channels that provide us with multiple ways to win in the marketplace – over the near and long term - and deliver shareholder value," said Geoff E. Tanner, President, Chief Operating Officer, and CEO Elect.

Outlook: SMPL continues to expect FY23 net sales to increase slightly greater than its long-term algorithm of 4-6%, including a headwind of almost 1% related to frozen pizza licensing. The company continues to foresee Adjusted EPS to increase less than the Adjusted EBITDA growth rate.

SMPL expects gross margin to decline versus last year in FY23, although at a lower rate than fiscal 2022.

"In the fourth quarter fiscal 2023 we expect net sales growth to meaningfully outpace retail takeaway as we lap a significant retail customer inventory reduction in the year ago period," Tanner added.

Price Action: SMPL shares closed higher by 2.60% at $35.50 on Wednesday.