KANSAS CITY, MO
Friday, May 11th, 2018
After acquiring The Chicago Bakery and entering an agreement to buy out Apollo Funds earlier this year, results are in, and Hostess Brands is off to a strong start to 2018 after reporting its financial results for the three months ended March 31, 2018.
“We are pleased with our sales momentum and strong start to 2018,” said Dean Metropoulos, Executive Chairman. “Our Chicago Bakery transformation is well underway, which we believe will provide significant opportunities for revenue growth within the Breakfast subcategory and be accretive to our future earnings. We continue to introduce new innovative items that have expanded the Hostess® brand market share and continue to expect to grow well above the category average in 2018 and beyond.”
According to a company press release, highlights from the first quarter of 2018 included the following:
- Net revenue increased 13.1%; excluding the Chicago Bakery, net revenue increased 5.2%
- The Chicago Bakery, acquired on February 1, 2018, contributed $14.5 million of net revenue
- Point of sale increased 6.3% for the 12-week period ended March 24, 2018. Point of sale for the top seven sub-brands increased 8.5%
- In the first quarter of 2018, the Company entered into an agreement to buy out the Apollo Funds' rights to all current and future tax savings under the tax receivable agreement in exchange for a $34.0 million cash payment, resulting in a gain of $12.4 million
- The Hostess® brand's market share for the 12-week period ended March 24, 2018 was 17.9%, up 124 basis points, which represents a record market share for the brand since its re-launch in 2013
- Net income was $29.3 million (including a one-time gain of $12.4 million related to the buyout of a portion of the tax receivable agreement) compared to $24.2 million
- Adjusted EBITDA was $47.0 million, or 22.5% of net revenue, compared to $54.5 million or 29.5% or net revenue
- For the Sweet Baked Goods Segment, Net revenue was $199.3 million, an increase of $24.5 million, or 14.0%, compared to $174.8 million, while gross profit was $69.4 million, or 34.8% of net revenue, compared to $76.8 million, or 43.9% of net revenue
- For the in-store Bakery Segment, Net revenue was $9.4 million, a decrease of 0.3 million, or 3.0%, compared to net revenue of $9.7 million, while gross profit was $1.8 million, or 19.1% of net revenue, compared to gross profit of $2.5 million, or 25.8% of net revenue
While, generally, the company’s overall outlook improved, Hostess Brands’ In-Store Bakery segment reportedly took a hit, and the company attributed significant decline in gross profit to high transportation costs and significant one-time investments in bonuses for hourly employees.
Hostess also disclosed its intention to continue to serve as a platform for future acquisitions as we continue to move through 2018.
For the full financial report, click here.
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