Simply Good Foods: Optimistic Forecast After Positive FY 2024 Results

In its first earnings call since acquiring OWYN, Simply Good Foods (SGFC) announced net sales gains amid a continued restructuring of the Atkins brand in the fourth quarter.

Thursday morning’s Q4 reported sales were $375.7 million, a 17.2% increase over $320.4 million in Q4 FY 2023. Net income fell slightly during the quarter to $29.3 million versus $36.6 million in the same period last year. Gross margin was 38.8%.

Category growth in nutritional snacking “remains strong,” said SGFC president and CEO Geoff Tanner in his prepared remarks. “Given the twin tailwinds of snacking and health and wellness as well as low household penetration, the category is expected to maintain its momentum and its multi-year growth trajectory.”

Across all three brands, SGFC’s total consumption increased by 8%, aided by the Quest and OWYN brands. Removing its most recent acquisition, the company’s “legacy” (Quest and Atkins) consumption moderated to about 4% growth.

Part of the company’s strategy moving forward is the integration of OWYN into SGFC’s portfolio and distribution network. Tanner said the company expects OWYN point-of-sale growth of “20% to 30% driven by higher velocities and increased items or SKUs at select retailers.”

In the near term, SGFC is focusing on “driving the core, expanding the number of doors and adding larger packs,” Tanner said. The company’s FY 2025 distribution growth expectations for OWYN are slightly lower than what recent data suggests because SGFC is more interested in “filling voids and pack sizes” before expanding the brand’s footprint further.

Along with the focus on OWYN, SGFC also has high hopes for the Quest brand’s new Bake Shop platform, which includes high-protein and low-sugar muffins and brownies. The company is also betting on growth in Quest’s high-protein chips as the segment climbs out of recent inventory issues. The strategy is aimed at isolating consumers in the addressable nutritional snacking category.

With the Atkins brand, SGFC is continuing a process of replacing underperforming items with new SKUs. In Walmart’s fall reset, SGFC replaced 17 Atkins SKUs with about 18 or 19 new products that are “turning about two times a week as opposed to one time a week,” CFO Shaun Mora added, showing an early indicator of renewed sales growth in the brand.

Despite the optimism from SGFC leadership, Atkins remains a work-in-progress. In the company’s presentation, it noted that the Q4 retail takeaway in Circana MULO + C-store declined by 8.4% in measured channels. SGFC also said it was expecting high single-digit declines as the brand experiences distribution losses and volume declines due to a reduction in trade and merchandising spend. Adding to the conservative investment approach, SGFC announced it was discontinuing Atkins “breakeven” export business to Canada.

For FY 2024, net sales were $1.3 billion, a 7.1% rise over FY 2023. Net income was $139.3 million for the year compared to $133.6 million in 2023. The company forecasts net sales to increase from 8.5% to 10.5% with adjusted EBITDA in the range of 4% to 6%.

Equity research from William Blair has SGFC “well-positioned with relevant brands in nutritious snacking” and estimates the company’s FY 2025 EBITDA at $280 million, up 4% year-over-year.