THS - NYSE
TreeHouse Foods, Inc.
THS·NYSE
$24.43
-0.029%Consumer DefensivePackaged Foods
TreeHouse Foods, Inc. manufactures and distributes private label foods and beverages in the United States and internationally. It operates through two segments, Meal Preparation, and Snacking & Beverages. The Meal Preparation segment provides aseptic cheese and pudding products; baking and mix powders; hot cereals; jams, preserves, and jellies; liquid and powdered non-dairy creamers; macaroni and cheese; mayonnaise; Mexican, barbeque, and other sauces; pastas; pickles and related products; powdered soups and gravies; refrigerated and shelf stable dressings and sauces; refrigerated dough; single serve hot beverages; skillet dinners; and table and flavored syrups. The Snacking & Beverages segment offers bars, broths, candies, cookies, crackers, in-store bakery products, pita chips, powdered drinks, pretzels, ready-to-drink coffee, retail griddle waffles, pancakes, French toasts, specialty teas, and sweeteners. The company sells its products through various distribution channels, including retailers, foodservice distributors, and co-manufacturers, as well as industrial and export, which includes food manufacturers and repackagers of foodservice products. TreeHouse Foods, Inc. was founded in 1862 and is based in Oak Brook, Illinois.
At a Glance
Live SnapshotMarket Cap$1.23B
EPS0.5200
P/E Ratio46.98
Earnings Date05/04/2026
Earnings Call Transcript
THS • 2024 • Q1
Operator
Welcome to the TreeHouse Foods First Quarter 2024 Conference Call. [Operator Instructions] Please note that this event is being recorded. At this time, I would like to turn the call over to Matt Siler of TreeHouse Foods for the reading of the safe harbor statement.
Matthew Siler
Good morning, and thank you for joining us today. Earlier this morning, we issued our earnings release and posted our earnings deck, both of which are available within the Investor Relations section of our website at treehousefoods.com. Before we begin, I would like to advise you that all forward-looking statements made on today's call are intended to fall within the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are based on current expectations and projections and involve risks and uncertainties that may cause actual results to differ materially from our forward-looking statements. Information concerning these risks is contained in the company's filings with the SEC. On September 29, 2023, we completed the divestiture of our Snack Bars business. Consistent with prior quarters, we will discuss our results on an adjusted continuing operations basis. A reconciliation of non-GAAP measures to their most direct comparable GAAP measures can be found in the release and the appendix tables of today's earnings deck. With that, let me now turn the call over to our Chairman, CEO and President, Mr. Steve Oakland.
Steven Oakland
Thanks, Pat. Before I open the call up to your questions, I want to thank the entire TreeHouse team for their hard work and dedication in driving our strategic execution as a private brand leader. We continue to prioritize execution, growth and margin expansion as we capitalize on the industry and consumer trends. As a result, we are well positioned to deliver our full year guidance. Looking ahead, we remain focused on delivering for our customers and consumers and extending our leadership in private brands. This, in turn, will create enhanced value for our shareholders. With that, I'll turn the call over to the operator to open the line for your questions.
Operator
[Operator Instructions] The first question comes from Rob Dickerson of Jefferies.
Robert Dickerson
Just 2 quick questions. First one is just the slide when you showed the price gaps. I'm just curious, Steve, maybe kind of like what your perspective is as to maybe why those price gaps have widened, right? Just given even the branded kind of volume-decline environment we've been experiencing over the past few quarters.
Steven Oakland
Sure. I think there's a couple of things. I think there's actually a small reset in the data recently to include a larger set of customers. Now that's all that data has the back data in it. So it's all apples-to-apples data. So I think it gives a little clearer perspective. Again, one of the largest hard discounters is now in that data. So that's good news because it gives us a clearer picture. But I also think it's an example of the investment the retailer is making in private brand, right? The retailer understands that the consumer is looking for value or at least there's a large segment of consumers looking for value. I think you can look at the national media over the last 2 weeks, and you've seen a couple of articles, both on our largest customers and the investments they're making. So I think it's the customer -- the retailer, excuse me, investing in private label.
Steven Oakland
Yes. I mean I know you -- Rob, you've written a lot about it, and the cocoa world is pretty well established in the customer mind. So it's not a big commodity for us. And our hedging tends to tie to our contracts, right? So we don't speculate beyond that. We basically cover the -- as Pat said, we cover what we need to do on the cycles, which we have pricing committed. So we feel good about the pricing and the response from the customer has been as expected. They know cocoa has moved dramatically.
Operator
The next question comes from Andrew Lazar of Barclays.
Steven Oakland
Andrew, the only thing I would add is that the only thing that really kept us from being on our algorithm, we thought we would exit last year $400 million. The only thing that kept us from that is the broth exercise. So with that behind us, we're in a much better place.
Operator
The next question comes from Matt Smith of Stifel.
Matthew Smith
And just one more for me. Last quarter, you talked about the lift that retailers see when they promote private label as being very positive for their profitability. Are you seeing -- or are you hearing from your partners that they will become more promotional with private label in the second half of the year, maybe during the seasonal time frame?
Steven Oakland
Matt, I think we'll see that in some of the high seasonal categories, things like refrigerated dough, we'll see that with coffee, those kinds of things in the back half. And it's really driven. Yes, they want to do it for the margin, but I think they're more confident in the supply chain this year. So last year, there was still a little bit of uncertainty on some ingredients and packaging things, et cetera. I think the fact that we've returned to service will drive a little more promotional activity in the fourth quarter.
Operator
Our next question comes from Carla Casella from JPMorgan Chase.
Carla Casella
I have a follow-up on cocoa. With all the bigger movement there, is that a category where you could see it going with the way of coffee, where you go into more pass-through contracts? Or is it still better managed through just hedging?
Steven Oakland
Carla, I think we will have to see volatility. I think coffee is pass-through because of the volatility, right, one weather event in Brazil swings the market dramatically. And so the retailers like pass-through because they feel like that's the truest way for them to participate in both sides of that. If we saw that kind of volatility, it appears from what we see now is there are some structural issues that have maybe just step-changed the cost of cocoa. If that, in fact, is the case, I don't know that it would be as functional as the pass-through we use for volatile commodities.
Carla Casella
Okay. Great. And then Walmart just announced a big new private label expansions across a bunch of categories. I'm just wondering if you're seeing any other -- or if you could just talk to trends, you did give some good, in your slides, explanation on private label and how it's gaining share, but any other key wins or losses you can talk to, even if you can talk through...
Steven Oakland
I think we touched on a couple of them in the prepared remarks, right? And they are a combination of 2 things. I would take it back one step. And I'd say that 18 months ago, we sold 40% of the company, right? And so for the last year or so, the organization has been focused on TSA and reorganization to run this new business and separate that was all intertwined in our distribution systems, et cetera. We now have the organization focused solely on building that pipeline and focused on our capabilities and our capacity and aligning those with the best opportunities for both sales and margins across the industry. So things like what you saw that announcement of new private label, I think one of the hard discounters had an article in the Wall Street Journal as well. So there's been a lot out lately, but our team, we're really pleased we can now focus and align that team on those opportunities rather than on the administration of the divestiture. So that's where we see the biggest opportunity and why we think the pipeline is so solid right now.
Operator
The next question comes from William Reuter from Bank of America.
William Reuter
My first question, on the new business wins that you laid out, were those wins that have been awarded to you since your initial guidance would have been provided? So -- or are these kind of -- these are some positive benefits in that they're being offset by maybe a little bit of a delay in the Broth facility? Or are these wins that you already knew you were going to be getting compared to guidance?
Steven Oakland
No, this is the natural progression, right? We guide early in the year, and these things tend to materialize as we go. So it's sort of a rolling cycle. So I would say, these are probably new news. And the Broth progress, as we spoke to earlier, we think is right on what we guided, right? We feel really good about that plan, and we think it's right on where we initially thought.
William Reuter
Got it. And is there any change in the competitive bidding environment for some of these private label volumes in terms of is it becoming more or less competitive, such that the profitability is either greater or less than it had been in the past?
Steven Oakland
No. I think there's areas of volatility. Our business, although simpler than before, is still a lot of different categories. So I think it's very category-specific. I think it's -- we tend to do really well in those areas where we're deep, which means we have capability, we have cost structure and we have the assortment necessary. And in those other areas is where we're investing to build that depth. So we tend to find the margins the best in those places where we have all the capabilities and the cost structure appropriately aligned.
William Reuter
Got it. And then just lastly for me on capital allocation. You've made some prepared comments about share repurchases. Last year, you had a handful of acquisitions. What are you seeing in the M&A landscape? And how do you think your capital will be allocated between potential additional acquisitions versus share repurchases?
Steven Oakland
Sure. I think we always say that our first priority for capital is to invest in our business. And the acquisitions you've seen of late have all been capability-driven, right? We really addressed our capability gaps in Coffee last year. We did that in Pickles here. It actually -- we announced it last year, but actually closed the first week of January. So that M&A would be an opportunity to build capabilities in those key businesses where we see growth opportunities. So I don't see transformational M&A in the near term. Never say never, but I don't see that in the near term. But following that, then it's about maintaining our balance sheet, obviously, balance sheet strength and then it's returning capital to shareholders. So we think we can do all 3, quite frankly.
Operator
The last question today comes from James Salera from Stephens Inc.
Steven Oakland
Yes. I would add just one thing. We talk a lot about the transformation we did that it put us in higher growth, higher-margin categories. But the other side of that transformation is that it improved our balance sheet, and it put us in a position where we can invest and we can target investment in our business. And we do have some locations where labor is tight. And those are the places where we're using automation, right, where we're using cobots and automated forklifts and those kinds of things to supplement our labor and to put our workforce in higher value, more rewarding positions. And so I think the other side of our transformation really put us in a place where we can manage the challenges of labor, we think will bring over the future, not just the current ones, but the future ones.
Operator
This concludes our question-and-answer session. I would like to turn the conference back over to Steve Oakland for closing remarks.
Steven Oakland
Yes, I'd like to thank you all for being with us today. And Pat and I look forward to speaking with you individually and to next quarter. Have a great day.
Transcript from May 6, 2024
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