Key Highlights

  • Adjusted diluted EPS of USD 1.14 missed the consensus estimate of USD 1.37, while GAAP diluted EPS was USD 1.07.
  • Net sales fell 2.4% to USD 481.5 million, missing the consensus estimate of USD 484 million as Foodservice dropped 6.9%.
  • Operating income dropped 30.1% to USD 41.4 million, and gross Margin narrowed to 23.0% from 24.1% a year earlier.
  • Bachan's added USD 17.8 million of Retail sales, yet the cyclospora outbreak cut Retail sales by roughly 4%.

The Marzetti Company (NASDAQ:MZTI) reported first quarter fiscal 2027 net sales of USD 481.5 million, down 2.4% from USD 493.5 million a year earlier and below the consensus estimate of USD 484 million. Adjusted diluted EPS of USD 1.14 compared with a consensus estimate of USD 1.37 and with USD 1.74 in the prior year quarter. GAAP diluted EPS was USD 1.07 against USD 1.71, and Net Income fell 37.9% to USD 29.3 million.

Adjusted diluted EPS excludes USD 0.07 per share of intangible amortization tied to the Bachan's Acquisition in the current quarter and USD 0.03 per share of restructuring and Impairment charges in the prior year quarter. Excluding prior year sales under a temporary Supply agreement, adjusted consolidated net sales fell 0.3%.

Volume Declines and Cost Pressure Compress Margins

The sales decline combined a 4.6% drag from lower organic Volume and mix and a 2.2% drag from the end of the temporary supply agreement with gains of 3.6% from Bachan's and 0.8% from pricing. Gross Profit fell USD 8.0 million to USD 110.8 million, with gross margin down 110 basis points, as lower production volumes, higher freight costs and added capacity at the Atlanta sauce and dressing Facility outweighed cost savings programs. Selling, general and administrative expenses rose 18.7% to USD 69.3 million, including USD 2.4 million of incremental noncash amortization for Bachan's intangibles. Interest expense was USD 2.8 million, with none a year earlier, and the effective tax rate was 24.4% against 22.4%.

Retail net sales rose 2.0% to USD 252.7 million, but Operating Income fell 26.5% to USD 37.2 million, and Operating Margin was 14.7% against 20.4%. Excluding Bachan's, Retail volumes declined 7.1%. Foodservice net sales fell 6.9% to USD 228.8 million, operating income dropped 12.6% to USD 30.4 million, and margin was 13.3% against 14.2%. The company estimated the outbreak reduced Retail sales by about 4% and Foodservice sales by about 2%.

Management Commentary on the Remainder of Fiscal 2027

For the second quarter and the rest of the fiscal year, the company anticipates that Retail sales continue to benefit from Bachan's and from new items, and that Foodservice sales remain supported by select quick-service restaurant customers. It also anticipates moderate Commodity cost Inflation and significantly higher diesel and freight costs, most or all of which it aims to offset through inflationary pricing and cost savings programs. Fiscal 2027 capital expenditures could total about USD 90 million. Corporate expenses were USD 26.1 million against USD 25.0 million, reflecting added Investment in personnel and IT.

Cash Flow, Debt and Payouts Against Prior Periods

Operating Cash Flow was USD 51.0 million against USD 69.5 million a year earlier, and cash and equivalents stood at USD 17.5 million at September 30 against USD 25.1 million at June 30. Outstanding term Loan borrowings were USD 197.5 million, with nothing drawn on the USD 200 million revolver. The company repaid USD 37.5 million of debt against USD 35.0 million of new borrowings in the quarter, and the term loan matures April 29, 2031, with a springing date of March 6, 2029 if the facility is not extended by December 6, 2028. Dividend payments were USD 27.4 million against USD 26.3 million, and treasury stock purchases were USD 5.8 million against USD 1.1 million.