Lancaster said retail channel buoyed by 3% net sales increase

Lancaster said retail channel buoyed by 3% net sales increase

US flatbread and dressings maker Lancaster Colony today (27 October) booked a slight fall in net sales in the company's first-quarter results, but turned in a 21% increase in operating income - boosted by factors including lower commodity costs.

Lancaster Colony said net sales dipped by 0.9% to US$291.4m compared to $294.1m in the same period a year ago. However, operating income increased to $50.8m ($41.8m previously) on lower commodity costs, particularly eggs, reduced freight costs and what Lancaster Colony called "a more favourable sales mix".

Net income for the period was $33.4m, or $1.22 per diluted share, compared to $27.6m or $1.01 per diluted share last year.

In the retail channel, Lancaster Colony said net sales increased 3% with Olive Garden dressings, Marzetti caramel dips, New York Brand Bakery frozen garlic bread products and Sister Schubert's frozen dinner rolls "performing well".

However, Lancaster Colony added: "Higher coupon expenses and product placement costs served to limit retail sales growth."

In the foodservice channel, Lancaster Colony'snet sales declined 5% as influenced by our targeted business rationalisation efforts, deflationary pricing from lower egg costs and weakness in limited time offer promotional programmes with national chain restaurants," the company said.

Chairman and CEO John Gerlach said: "While our top line was challenged by the customer rationalisation and deflationary pricing in the foodservice channel, we were encouraged by the improved contributions from our frozen bread businesses in the retail channel and pleased to report record high first quarter operating income."

Gerlach said the company had seen "a heightened level of competition within the refrigerated dressing category in recent months" but remained "very positive about this category and our leading market position".

Looking ahead, Gerlach said: "Commodity costs are expected to remain favourable in the second quarter then turn flat for the back half of the fiscal year. On the innovation front, retailer acceptance of the recently introduced Bake & Break garlic bread loaf from New York Bakery has been trending favourably. We also launched a new Sister Schubert's Shareable bread loaf and added a red wine balsamic flavour to our line-up of Olive Garden retail dressings."

Last year, Lancaster acquired premium flatbread maker Flatout Holdings for approximately $92m