CINCINNATI — AdvancePierre Foods Holdings, Inc. is seeing greater opportunity in two areas at retail — frozen foods and on the perimeter. The opportunities buoyed earnings during the third quarter of fiscal 2016.
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| John Simons, c.e.o. of AdvancePierre |
“We are seeing a genuine curiosity of how we can do things for (retailers) that other C.P.G. companies are simply unable to do, because they have one-size-fits-all with a branded program, or they are unwilling to do, just because maybe they are not quite as nimble or capable,” said John Simons, chief executive officer, during a conference call on Nov. 9 to discuss financial results.
Calling the frozen food aisle dormant and declining, Mr. Simons said retailers are looking for innovation. With the company’s portfolio of products, AdvancePierre may offer customers both retail and private brand options.
“The other thing that’s happening is that there is a migration to the perimeter of the store, and you have probably seen, we have one Kroger up in Loveland, north of us here, that’s putting in TVs and a bar ...,” Mr. Simons said. “So stores are now trying to draw shoppers into the perimeter.”
For the third quarter ended Oct. 1, AdvancePierre Foods recorded net income of $22,445,000, equal to 29c per share on the common stock, an increase compared with the same period of the previous year when the company earned $12,636,000, or 19c per share.
Net sales for the third quarter of 2016 were $393.7 million, which compared with $407.2 million for the third quarter of 2015.
The decline was primarily attributable to the elimination of lower margin business in its Industrial segment, which reduced net sales by $14 million, and to strategic price and trade spending investments to reflect lower raw material costs, which reduced net sales by $8.8 million, according to the company.
AdvancePierre’s Foodservice business unit sales fell 4.7% to $222.6 million during the quarter. The company said the decline was attributable to lower volume, unfavorable mix and a reduction in net pricing. Lower fruit-cup sales to the unit’s schools sub-channel and slower restaurant traffic were the causes of the volume decline, the company said.
“The fruit is limited to one main school district, so thereby is limited in scope and margin loss,” Mr. Simons said. “We expect to gain chain accounts slowly but steadily during the balance of this quarter and going forward, but we really don’t know how to gauge the duration of restaurant declines across key categories.”
Retail sales for the company increased 8% to $94.6 million. The increase was attributed to higher volume and a favorable mix.
Net sales for the Convenience segment increased 11.7% to $56.5 million in the third quarter of 2016, compared with $50.6 million for the third quarter of 2015. Volume growth was driven by new product introductions and increased distribution to convenience stores.
“Consumers are going to convenience stores like no one’s business right now,” Mr. Simons said.
For full year 2016, AdvancePierre expects net sales in the range of $1.545 billion to $1.575 billion, including volume growth of 2% to 2.5%, the company said. EBITDA is expected to be in the range of $290 million to $295 million and net income per share in the range of $1.65 to $1.75.
