COLUMBUS, OHIO — Lancaster Colony Corp. navigated through a period of historically high egg costs and challenges in its frozen dinner roll business to post increases in both earnings and sales during fiscal 2016.
Net income in the year ended June 30 was $121,764,000, equal to $4.45 per share on the common stock, up 20% from $101,686,000, or $3.72 per share, in fiscal 2015. Sales climbed to $1,191,109,000 from $1,104,514,000.
As a result, the company enters fiscal 2017 “optimistic about our business,” Jay Gerlach, chairman, chief executive officer and president, told analysts during an Aug. 18 conference call. Mr. Gerlach said his positive outlook comes in face of two major sales growth challenges in its food service channel.
 |
| Jay Gerlach, chairman, c.e.o. and president of Lancaster |
“Our customer rationalization process will impact sales negatively, and price deflation will have a smaller but still meaningful impact,” he said. “The reduced sales growth should not, however, unfavorably affect profitability, as the rationalization plan should improve efficiencies in our dressing and sauce operations, and deflationary pricing is a pass-through of reduced ingredient costs.”
Mr. Gerlach said Lancaster expects continued strength in Marzetti and Simply Dressed refrigerated salad dressings, croutons, and improving Flatout and New York Bakery frozen garlic bread sales volumes. Olive Garden dressing also is expected to grow. The company anticipates new products providing a boost as well.
“New products, such as our New York Bakery Bake & Break garlic bread, Marzetti Vineyard Dressings and just-introduced Sister Schubert’s Shareable Bread are also expected to contribute to retail channel growth,” Mr. Gerlach said. “We also feel our core national chain restaurant business should continue to grow, absent the business we rationalized. We expect increased consumer and trade spending to support new products and general growth and distribution initiatives.”
Lancaster will continue to focus on its supply chain, he said, with both customer service and cost reductions a priority.
“Improving our operating efficiencies is an everyday goal across our business,” he said. “We expect lower ingredient costs, driven by much lower egg costs versus the unusual spike experienced last year. Other ingredients are expected to be generally favorable the first half of our fiscal year and then trending to flat in the second half. Freight costs are anticipated to remain at lower levels, although we likely will be lapping those as the year progresses.”
Another area of focus for Lancaster in the year ahead will be acquisitions, Mr. Gerlach said, adding that the company will keep an eye on potential branded retail product lines that are on-trend with the consumer and likely merchandised in the perimeter of the store.
“With our longtime presence in the produce department and our more recent move into deli with the Flatout acquisition, we particularly like those areas of the store,” he said.
