The Hillshire Brands Company (NYSE: HSH) today reported results for its first quarter of fiscal year 2014.
- Net sales increased 1% to $984 million over the prior year’s first quarter
- Adjusted 1 operating income of $76 million, down 24.4% versus the prior year’s 76.5% increase, reflecting significant input cost inflation in the quarter and unusually low SG&A in the prior year. Reported operating income was down 35.2%
- Adjusted diluted EPS of $0.35 down 28.6% versus the prior year’s 88.5% increase; reported diluted EPS of $0.23 down 42.5%
“I’m pleased to report a solid start to the year,” said Sean Connolly, president and chief executive officer of The Hillshire Brands Company. “Although input cost inflation has been significantly higher than anticipated, we continue to make good progress with our brand-building efforts. In particular, I’m encouraged by the overall strong consumption trends we’ve seen.”
“As we’ve moved into the second quarter, we’ve begun to take additional pricing actions. While this will pressure volumes as consumers adapt to higher price points, we still expect sales trends to improve in the second half behind a robust innovation slate. We also still expect gross margins to improve in the second half, fueled by both our pricing actions and our cost efficiency programs. Accordingly, our full year guidance remains unchanged at this time.”
Discussion of Continuing Operations Results
Net sales of $984 million were up 1% versus the prior year’s first quarter, as positive pricing and mix in the Foodservice/Other segment more than offset a modest decline in Retail sales. Adjusted operating income of $76 million was down by 24.4% over the prior year, mainly driven by significantly higher input costs
as well as low SG&A, excluding MAP, in the prior year. Reported operating income was $55 million, down 35.2% from the prior year’s first quarter.
Retail net sales showed a slight decline of 0.7% in the first quarter versus a strong prior year comparable. Favorable mix was more than offset by lower volumes and lower pricing, reflecting higher above-the-line marketing investment.