Matthew Edward Smith

Matthew Edward Smith inquired about the drivers behind the implied deceleration in Altria's fourth-quarter earnings growth, beyond the share repurchase and MSA legal fee expiration, and the path to growing smokeable Operating Companies Income (OCI). He also asked about the factors contributing to the sequential moderation in the underlying cigarette industry's rate of decline.

Answer

CFO Sal Mancuso highlighted the need to monitor consumer spending and the dynamic marketplace, expressing satisfaction with the first nine months' financial performance and smokeable profitability. CEO Billy Gifford attributed the moderation in cigarette volume decline to consumer consistency in macroeconomic factors like gas prices and inflation, alongside increased e-vapor enforcement shifting consumers to other nicotine categories.

Matthew Edward Smith asked for an estimate of the inventory headwind for Atkins due to distribution losses and an update on Quest's Q2 merchandising comparison, specifically regarding club channel distribution expansion.

Answer

CFO Chris Bealer indicated that Atkins' net sales are expected to decline more than 20% in the first half, reflecting both consumption decline and distribution-driven inventory reductions. President and CEO Geoff Tanner explained that Quest is lapping heavy merchandising from Q2 last year, particularly a successful club test. He noted that future club distribution will be more spread out throughout the year, representing significant white space for the company.

Matthew Edward Smith asked for an estimate of the inventory headwind expected for Atkins, given its projected 20% consumption decline and distribution losses. He also requested an update on Quest's tough merchandising comparison in Q2, specifically related to lapping a large club event last year, and the current progress of Quest's distribution expansion within the club channel.

Answer

CFO Chris Bealer stated that Atkins' net sales are expected to be down more than 20% in the first half, reflecting both consumption decline and the impact of distribution losses on retail inventory. For Quest, he confirmed tough merchandising laps in Q2 last year, alongside the full effect of price elasticities. President and CEO Geoff Tanner elaborated on Quest's club channel performance, noting that a successful test at a large club customer last year is now phasing into more spread-out, consistent distribution throughout the year, rather than being concentrated as it was previously. He expressed excitement about the new relationship and the significant white space it represents for Simply Good Foods.