B&G Foods has revised its full-year guidance for the third time, now reducing the upper limit of its EBITDA target by $20 million since its initial outlook in February.
The U.S.-based owner of the Green Giant vegetable brand lowered its projections for sales, adjusted EBITDA, and adjusted diluted earnings per share as it released its third-quarter results on November 5. Each of these key metrics has declined, mirroring a downward trend across the first nine months of the current fiscal year.
Casey Keller, President and CEO, linked the disappointing results to consumer behavior, noting that shoppers are still grappling with price increases implemented to counteract historically high input costs. “B&G Foods’ third-quarter results reflected a slower-than-expected recovery in sales trends, consistent with the center store packaged-food industry,” Keller stated.
He further emphasized, “We expect trends to gradually improve and stabilize into the first half of 2025 as we navigate consumers’ responses to higher prices across food categories.”
During the three months ending September 28, B&G Foods reported an 8.3% decrease in sales, totaling $461.1 million.
For adjusted EBITDA, a notable drop of 12.5% was recorded, coming in at $70.4 million, while the adjusted diluted earnings per share fell by 51.9% to 13 cents. On a positive note, the company managed to turn around its net income to a profit of $7.5 million from an $82.7 million loss in the same quarter of the previous year; however, the overall year-to-date performance still reflects a loss of $28.8 million.
B&G Foods has attributed its weak performance over the last three and nine months to the impacts stemming from the 2023 divestiture of some of its Green Giant business, specifically the shelf-stable products sold to co-manufacturer Seneca Foods late last year. While B&G Foods has retained trademarks for the brand, along with its frozen and Le Sueur product lines, Keller previously suggested that the frozen vegetable sector might not align with the company’s strategic focus and capabilities.
In February, B&G Foods set sales targets in the range of $1.975 billion to $2.02 billion for the 2024 fiscal year, in addition to an adjusted EBITDA outlook of $305-325 million and adjusted diluted EPS between $0.80 and $1.00. However, after previous reductions in May and August, full-year sales are now expected to fall between $1.92 billion and $1.95 billion, coupled with anticipated adjusted EBITDA of $295 to $305 million and adjusted diluted EPS between 67 and 77 cents.
The company previously sold the Back to Nature brand of snacks at the end of 2022 and has since reorganized its divisions into four categories: spices and seasonings, meals, frozen, and vegetables/specialty. Analyst Robert Moskow from TD Cowen highlighted the possibility of further asset sales, noting, “The results and outlook reinforce our concerns about the weak spots in the company’s portfolio and its competitive positioning.”
Moskow commented, “Management reiterated their intention to simplify their portfolio and reduce debt by exiting as much as 10% of their sales, while placing their frozen business, which accounts for 21% of sales, under strategic review. Mathematically, we assume they will need to sell assets at a multiple above seven times EBITDA to decrease their current leverage.” He added that divesting frozen vegetables could enhance free cash flow due to the significant working capital demands associated with that segment.
Following this news, B&G Foods’ shares experienced a 1.7% increase, closing at $8.82 on the New York Stock Exchange, but this still reflects a nearly 21% decline year-to-date.
Examining the broader landscape, B&G Foods navigates a challenging environment within the food and beverage industry. The continued decline in traditional sales channels highlights a need for strategic adjustments in light of evolving consumer preferences and market dynamics influenced by recent trends in the food and drink business.
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