LENEXA, KAN. — Even as Hostess Brands, Inc. continued to encounter pockets of supply chain fragility and elevated cost inflation, in the third quarter ended Sept. 30, the company delivered its 11th consecutive quarter of at least 9% revenue growth and the sixth consecutive quarter of double-digit earnings growth.
In a Nov. 3 conference call with analysts, Andrew Callahan, president and chief executive officer, highlighted the company’s position in the indulgent sweet snacking segment, one of the largest and fastest-growing segments within macro snacking.
“First, we have unique access to broad, fast-growing snacking occasions and a best-in-class business model that fits perfectly with our impulse-driven categories,” Mr. Callahan said. “We are attractively priced relative to other snack offerings, providing consumers an accessible option as they look to stretch their shopping dollars.
“In addition to our presence in growing categories, we are targeting the most attractive snacking occasions where Hostess and Voortman are uniquely positioned to win. We are prioritizing five fast-growing occasions, which are more than $50 billion in retail sales and provides us a large and sustainable platform for our future growth.”
Hostess Brands net income in the third quarter ended Sept. 30 was $66.3 million, equal to 48¢ per share on the common stock, compared with $26.2 million, or 19¢ per share, in the third quarter last year. The increase was driven in part by a $33 million gain on receipt of Voortman insurance proceeds, according to the company.
Adjusted net income, which excluded the receipt of Voortman insurance proceeds, was $32.2 million, equal to 23¢ per share on the common stock, an 11% increase from $28.9 million, or 21¢ per share, in the year ago period.
Net sales for the third quarter were $346.2 million, an increase of 20.2%, from $288 million, the same period last year. Contribution from pricing actions and product mix provided 20.1% of the growth, while higher volume accounted for 0.1% of the quarterly growth, the company said.
Most of the growth in the quarter was driven by pricing. Volume was essentially flat.
Hostess net revenue from cookies surged 33.2% to $38.9 million in the quarter. Voortman point of sale increased by 28.8% in the quarter including 28.1% growth in the sugar-free segment where it gained 500 basis points of share during the quarter.
Sweet baked foods net revenue climbed 18.7% to $307.3 million during the quarter. Sweet baked foods point of sale led by the Hostess brand grew by 17% in the quarter, maintaining its share of category dollar sales at 21.4%.
The company recently conducted a survey to better understand the impact of the current environment on consumers in its core categories.
“The majority of the consumers surveyed are indeed worried about the economy and plan to cut back spending,” Mr. Callahan said. “However, a vast majority of the same consumers indicated they will continue to look for new snacking options and 82% say that sweet snacks bring them joy, especially during times of uncertainty. This is consistent with other data and research and reinforces our belief that the Hostess Brands portfolio is well positioned as consumers look for value in the current environment.”
Given the year-to-date results, Hostess raised its full-year top- and bottom-line outlook. The company is now guiding 2022 net sales to increase by 17% to 19%, while targeting full year EBITDA and EPS growth at $290 million to $293 million and 96¢ to 98¢, respectively.
Hostess’ stock price on Nasdaq Nov. 3 jumped almost 10% to a high of $28.15 from the previous day’s close of $25.70.
In the first nine months of 2022, Hostess net income was $131.3 million, equal to 95¢ per share, up 12.9% from $82.8 million, or 63¢. Sales were $1.02 billion, up 20.7% from $844.9 million.Sweet snacks propel Hostess in 11th consecutive quarter - BakingBusiness.com
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