The Marzetti Company (MZTI) Q4 2025 Earnings Conference Call Transcript

Access earnings results, analyst expectations, report, slides, earnings call, and transcript.

Overview

The earnings call presents mixed signals: positive gross profit growth, retail sales increase, and a dividend hike are offset by decreased operating income and EPS due to rising SG&A expenses. The Q&A section reveals stable but uninspiring market expectations and unclear responses on key issues like the temporary supply agreement and soybean oil pricing. While the market strategy and shareholder return plan are positive, the financial health and guidance are weak, suggesting a neutral stock price movement.

Key Financial Performance

Consolidated Net Sales $475.4 million, a 5% increase year-over-year. This growth was driven by higher core volume, product mix, and a temporary supply agreement with Winland Foods.

Gross Profit $106.1 million, an 8.7% increase year-over-year. The increase was attributed to higher volume and mix in the Retail segment and ongoing cost savings programs.

Retail Segment Net Sales $241.6 million, a 3.1% increase year-over-year. Growth was driven by licensing programs, own brands, and increased marketing investments.

Retail Sales Volume Increased 2.9% year-over-year, excluding sales from exited bakery items. This was supported by strong performance in frozen dinner rolls and garlic bread categories.

Foodservice Segment Net Sales Increased 1.4% year-over-year, excluding noncore sales. Growth was supported by inflationary pricing and increased demand from national chain restaurant accounts.

Selling, General and Administrative Expenses (SG&A) Increased by 16.7% year-over-year, driven by higher marketing spend, personnel costs, legal expenses, and integration costs for the Atlanta facility.

Operating Income Decreased by $2.8 million year-over-year due to higher SG&A expenses and restructuring costs, despite improved gross profit.

Diluted Earnings Per Share (EPS) $1.18, a 6.3% decrease year-over-year. Restructuring and integration costs impacted EPS negatively.

Capital Expenditures $58 million for property additions and $78.8 million for acquiring the Atlanta-based dressing and sauces facility. This reflects investments in cost savings and manufacturing improvements.

Cash Dividend $0.95 per share, a 6% increase year-over-year, marking 62 consecutive years of annual dividend increases.

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Operating Highlights

Texas Roadhouse dinner rolls: Expanded distribution and new national shipping to all major retailers planned for fall 2026.

Chick-fil-A sauces: Introduced into the club channel, driving 17.2% sales growth and a 30 basis point market share increase.

New York Bakery frozen garlic bread: Continued strong performance with a 10% sales growth and a 260 basis point market share increase to 43.3%.

Sister Schubert's frozen dinner rolls: Achieved 52.4% growth in the frozen dinner roll category, contributing to a market share increase of 690 basis points to 63.8%.

Retail segment: Net sales increased by 3.1% to $241.6 million, driven by licensing programs and core brands.

Foodservice segment: Sales improved by 1.4%, supported by demand from national chain restaurant accounts and Marzetti branded products.

Atlanta-based sauce and dressing facility: Acquired and integrated into the manufacturing network to optimize supply chain.

Milpitas, California facility closure: Planned closure as part of supply chain optimization, with production ending by September 2025.

Cost savings initiatives: Ongoing focus on supply chain productivity, value engineering, and revenue management to improve margins.

Rebranding to The Marzetti Company: Rebranded from Lancaster Colony Corporation to align with the flagship Marzetti brand and future growth strategy.

Growth pillars: Focused on accelerating core business growth, simplifying supply chain, and expanding through M&A and strategic licensing.

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Risk or Challenges

Closure of Milpitas, California facility: The planned closure of the sauce and dressing facility in Milpitas, California, as part of manufacturing network optimization, could disrupt production and lead to transitional challenges.

Integration of Atlanta-based facility: Costs and operational challenges related to integrating the newly acquired Atlanta-based dressing and sauces facility could impact financial performance and operational efficiency.

Restructuring and impairment charges: The company incurred $5.1 million in restructuring and impairment charges, which reduced earnings per share and reflect ongoing costs of operational adjustments.

Inflationary pressures: Anticipated modest cost inflation in 2026 could pressure margins, requiring effective cost savings and pricing strategies to maintain profitability.

Economic uncertainties: External factors such as U.S. economic performance and consumer behavior may impact product demand, posing risks to revenue growth.

Temporary supply agreement expiration: The temporary supply agreement with Winland Foods, contributing $12.2 million in sales, is expected to end by March 2026, potentially reducing revenue.

Higher SG&A expenses: Increased selling, general, and administrative expenses, including marketing, personnel, and legal costs, could strain profitability.

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Guidance & Outlook

Retail Segment Sales: Anticipated to benefit from volume growth with contributions from licensing programs and core brands such as Marzetti, New York Bakery, and Sister Schubert's. Texas Roadhouse dinner rolls will begin shipping nationally to all major retailers this fall, and new items for core brands are planned for launch in the year ahead.

Foodservice Segment Sales: Expected to grow due to contributions from select QSR customers and national chain restaurant accounts. Culinary team will focus on innovation initiatives and favorable flavors to drive menu excitement and traffic growth.

Input Costs: A modest level of cost inflation is anticipated in 2026, which the company plans to offset through contractual pricing and cost savings programs, aiming for continued margin improvement.

Manufacturing Network: The newly acquired Atlanta-based sauce and dressing plant will be incorporated into the manufacturing network. Combined with the closure of the Milpitas, California facility, the supply chain is expected to cost-effectively support growth in fiscal year 2026 and beyond.

Capital Expenditures: Forecasted to be between $75 million and $85 million for fiscal 2026, focusing on cost savings projects, manufacturing improvements, and the integration of the Atlanta facility.

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Shareholder Return Plan

Quarterly Cash Dividend: $0.95 per share paid on June 30, representing a 6% increase from the prior year's amount.

Annual Dividend Increase Streak: 62 years of consecutive annual dividend increases.

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Key Q&A

Q:What are the expectations around QSR industry traffic and innovation for FY '26?

A:The QSR industry traffic is expected to be flat or modestly improving, with no significant catalysts for a downturn or improvement. Innovation is expected to focus on value offerings, particularly in chicken and snacking, which will benefit the business. Pizza QSR is also expected to remain relevant due to its focus on affordable price points.

Q:What is the visibility on soybean oil pricing and its impact on the business?

A:Soybean oil pricing has seen a spike due to increased use in renewable diesel, but it is not expected to be a near-term headwind. Soybean oil constitutes about 10% of the commodity basket, and the company has hedging positions to manage costs. The current market and hedging positions indicate no significant headwind or tailwind for FY '26.

Q:What factors contributed to the increase in G&A spend, and what is the outlook for FY '26?

A:The increase in G&A spend was due to marketing investments, Atlanta integration costs, legal costs, and timing of costs from Q3 flowing into Q4. For FY '26, G&A spend is expected to grow in line with inflation, excluding transient items like integration costs.

Q:What cost savings were realized in FY '25, and what is the outlook for FY '26?

A:Cost savings in FY '25 were achieved through procurement savings, value engineering, labor management, and benefits from SAP implementation. For FY '26, additional savings are expected from the network reset, including the Milpitas facility closure and College Park ramp-up. Benefits from these changes are expected to flow through in the back half of FY '26.

Q:How should the temporary supply agreement revenue be modeled for FY '26?

A:The temporary supply agreement revenue should be excluded from the model as it is noncore and temporary.

Q:What is the outlook for the consumer environment and its impact on the business?

A:The consumer environment is expected to see modest tailwinds if inflation remains in check, interest rates recede, and gas prices remain flat or decline. Foodservice is expected to sequentially improve, while Retail is expected to grow through new product launches and innovation.

Q:What marketing investments were made in the Retail segment, and how will they impact profitability?

A:Marketing investments were made to drive household penetration and share growth, particularly for products like Texas Toast. These investments impacted profitability in the short term but are not expected to reset marketing spend levels. Operating margins are expected to remain flat or grow in line with productivity programs.

Q:What is the volume trajectory for the Foodservice segment?

A:The Foodservice segment saw growth from some QSR customers and branded portfolio items, offsetting headwinds from reduced LTOs by larger customers. Volume is expected to improve as these headwinds are lapped in the back half of FY '26.

Q:Review of Unclear Management Responses

A:Management avoided providing a direct answer on the specific revenue contribution from the temporary supply agreement, advising instead to exclude it from modeling. Additionally, while discussing soybean oil pricing, the response lacked detailed clarity on potential long-term impacts of renewable diesel demand on costs.

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Earnings Word Cloud

The most frequently occurring keywords in this quarter's earning call

MZTI Transcript

The Marzetti Company (MZTI) Q1 2026 Earnings Call Transcript

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The earnings call presented strong financial performance with record high gross profit and operating income, along with market share gains in key categories. Despite increased SG&A expenses, the company's strategic initiatives in product distribution and partnerships, particularly in the Foodservice segment, have shown positive results. The Q&A section further highlighted strong growth drivers and an improved outlook for the year. Although there were restructuring costs, the overall sentiment and guidance are optimistic, indicating a likely positive stock price movement.

The Marzetti Company (MZTI) Q4 2025 Earnings Conference Call Transcript

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