The slide in Simply Good Foods’ shares on the back of its latest annual results appears more related to the below-consensus outlook for the new year than the ongoing challenges with the Atkins weight-loss brand.
Colorado-based Simply Good Foods put Atkins into “revitalisation” mode last year with a plan to trim underperforming SKUs but shore up the brand’s portfolio through innovation in high-protein, low-sugar snack bars and shakes.
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While the trimming of low-hanging SKUs is still having a negative impact on Atkins retail sales, analysts expect the losses to moderate as the plan progresses, with revenue support from Simply Good Foods’ other two brands – Quest and the recently acquired Only What You Need (OWYN).
As it stands, any talk of a potential disposal of Atkins – from management or otherwise – has not surfaced as president and CEO Geoff Tanner made his commitment clear, despite incurring fourth-quarter and full-year impairment charges and paring back revenue expectations relating to the SKU cuts.
The rising use of the GLP-1 weight-loss drugs, particularly in the US, is likely to bring additional support for Atkins given the need for dietary enhancements from protein- and fibre-rich foods for those taking the medication. And at the same time, a more generalised trend for protein is also playing out.
That was also a view shared by UK-based FMCG business Supreme, which announced this week it was acquiring the SlimFast weight-loss brand from Ireland’s Glanbia.
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By GlobalData“Our vision is to be the scaled leader in high-protein, low-sugar and low-carb food and beverage products, where growth is being fuelled by a generational shift in consumer eating habits that continues to mainstream,” Tanner said as he presented the latest results yesterday (23 October).
“Our outlook for fiscal year 2026 balances our long-term ambition, continued growth expectations for Quest and OWYN and the benefits from productivity, pricing and investments in our brands, against the two important challenges of reduced distribution for Atkins and cost pressures from inflation and tariffs.”
Shares “oversold”
Bernstein analyst Alexia Howard wrote in a follow-up research note that yesterday’s decline in Simply Good Foods’ share price – it closed down 17% at $20.63 – “seems oversold for a business that is still well-aligned with consumer interest in high protein and low-sugar foods and beverages”.
Howard provided some further perspective: “The Atkins brand is going through a purge but it seems as though this is now completed and will be largely lapped as we enter FY-27: 75% of the Atkins brand sales (which now represents just 25% of company-wide sales) are growing healthily with solid margins.”
However, she added that “a long tail of small and unprofitable SKUs introduced by a previous team has recently been rationalised”, and is likely to further weigh on sales in the new 2026 fiscal year to the tune of around 20%.
While Simply Good Foods notched up reported and organic sales growth of 9% and 3%, respectively last year, along with a 3% increase in adjusted EBITDA, the guidance for 2026 was more conservative and below consensus expectations.
Projections from the company are for organic sales in a range of down to up by 2% and adjusted EBITDA to range between a decline of 4% and a positive 1%. The gross margin is expected to drop by 100 to 150 basis points.
“Although the company is forecasting innovation and sales growth for both the Quest and OWYN brands, as well as productivity improvements, these will be offset by increased input-cost inflation and continued Atkins challenges,” Howard wrote, noting the consensus estimates for sales and adjusted EBITDA in the new year of 2.7% and 1.6%, respectively.
The shake-out in the Atkins portfolio looks to be taking longer than expected although the pressure on sales for 2025 was predicted by Tanner at the same point last year, when the CEO said the “revitalisation plans are progressing as planned and the launch of core bar and shake innovation is tracking well”.
Tanner said at the time that “optimising and improving” the return on investment from Atkins was “necessary to ensure the brand remains a sustainable and profitable business over the long term”.
Atkins impairment charges
Fast-forward to this October, Simply Good Foods said total retail sales rose 4% in the final quarter of last year, driven by gains of around 11% for Quest and 14% for OWYN, but Atkins declined about 12%.
Over the year, group retail sales were up 5% – 12% for Quest and 34% for OWYN – but a decrease of 10% for Atkins.
Simply Good Foods took a $60.9m non-cash impairment loss related to the Atkins brand, which was “primarily the result of a challenging fiscal year 2025 and updated projections of future revenue”.
William Blair analyst Jon Andersen wrote yesterday that the total 4% retail sales growth in the fourth quarter “masked what remain highly divergent trends at a brand level – both Quest and OWYN grew double digits, while Atkins continued to decline”.
He added as William Blair kept its ‘outperform’ rating on the shares: “Our sense is the 2026 guidance, while initially disappointing, is achievable given the demand programming behind Quest and OWYN, some downside protection on Atkins based on potentially conservative planning assumptions (impact of the tail SKUs should moderate)…”
Simply Good Foods was built on acquisitions and Andersen suggested more could materialise, albeit perhaps over the longer term.
The business was formed in 2017 through a SPAC merger between Conyers Park Acquisition Corp. and Atkins Nutritionals. Quest Nutrition was then acquired in 2019 for $1bn and plant-based shakes and powders maker OWYN last year for $280m.
“While current consumer and competitive dynamics impact near-term visibility, we believe in our thesis that Simply Good’s target nutritious snacking market, on-trend brands in Quest and OWYN, and asset-light cash-generation model, can support solid organic growth augmented (over time) by acquisitions,” Andersen said.
Simply Good Foods essentially expressed support for future M&A in yesterday’s results announcement as the company projected a tougher operating environment in the first half compared to the second for both sales and profits.
“Continued innovation and distribution-driven net sales growth from Quest and OWYN across the year are expected to be offset by challenges for Atkins, with the timing of price elasticity and lapping of certain year-ago promotional events expected to reflect incremental headwinds to growth in the first half of the year,” Simply Good Foods explained.
“Management is focused on long-term growth for the total company and will look to provide more fuel for growth should it find the opportunity to do so.“
