Hostess Brands posts 17% Q2 growth despite volatile environment
President and CEO Andy Callahan attributes the company’s 10th straight quarter of double-digit growth to “iconic brands, access to faster growing snacking occasions, broad-based distribution footprint and excellent execution.”
For the three and six months ended 30 June 2022, the Kansas-based company continued its “top-line momentum”, thanks to “our team’s timely actions to address the ongoing supply-chain fragility and higher inflation, which pressured our margins in the quarter,” said Callahan.
Q2 earnings snapshot
Net revenue increased 16.8%. Higher prices and a favourable product mix accounted for 13.8% of the quarterly growth, with remaining growth attributed to higher volumes.
The company’s Sweet Baked Goods point-of-sale (POS) increased 15.6%, maintaining its share of category dollar sales at 21.7%.
The growing demand for healthier snacks also saw the Voortman sugar-free branded POS grow by 25%, punching up the company’s share of the cookie category.
Gross profit jumped 7.2% to $112.7 – 33.1% of net revenues – or 7.1% to $112.8m on an adjusted basis.
As expected, second quarter gross margins declined by 295 basis points versus year-ago levels, impacted by inefficiencies caused by supply-chain fragility and 20% inflation. Inflation is currently expected to be in the high teens for the full year.
Net income was $30.5m or $0.22 per share, a slight increase from the prior year period, meeting Street expectations.
Hostess expects full-year earnings in the range of 93 cents to 98 cents per share.
Adjusted EBITDA slight 0.7% increase to $68.9m was due to higher operating expenses.
Capital expenditures increased to $41.9m from $22.2m for the same period a year ago. Full year expenditures are expected to be in the $120m-$140m range.
Raises full year sales growth
The company raised full year 2022 net revenue guidance and maintained full year adjusted EBITDA guidance towards the higher end of $280m-$290.
“Our year-to-date results are tracking ahead of our initial expectations and our long-term growth targets, enabling us to raise our full-year net revenue guidance to at least 15% growth while maintaining our full-year EBITDA and EPS guidance,” said Callahan.