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LANCASTER COLONY CORP (LANC)·Q4 2024 Earnings Summary

Executive Summary

  • Q4 FY2024 revenue declined 0.4% to $452.8M, gross profit rose 4.8% to $97.6M with gross margin expanding 110 bps to 21.6% on cost savings; diluted EPS was $1.26, up from $0.33 YoY, aided by lower restructuring/impairment charges .
  • Relative to public consensus, results missed: revenue $452.8M vs ~$462.3M and EPS $1.26 vs ~$1.38; management cited deflationary pricing in Foodservice and winding down Project Ascent costs as context; no numerical revenue/EPS guidance was provided for FY25 .
  • Foodservice volumes grew 4.2% despite deflationary pricing; Retail net sales fell 0.8% but grew 1.4% when excluding the exited perimeter-of-store bakery lines (Flatout and Angelic Bakehouse) .
  • FY25 outlook: low single-digit volume growth for both segments, PNOC neutral, margin improvement driven by cost savings; tax rate ~23%, capex $70–$80M; dividend maintained at $0.90/share (61st consecutive annual increase) .
  • Licensed brands remain an important growth driver (Subway and Texas Roadhouse sauces launched; refrigerated dressings share 27.4%, garlic bread share 40.6%); new Texas Roadhouse dinner rolls in regional pilot and patent-backed gluten-free Texas toast targeted for early FY25 shipments .

What Went Well and What Went Wrong

What Went Well

  • Gross margin +110 bps to 21.6% on cost savings programs despite flat sales; “we did not benefit from PNOC in our fiscal fourth quarter” (clear productivity driver) .
  • Licensing momentum: Subway and Texas Roadhouse sauces added incremental growth; refrigerated dressings (Chick-fil-A + Marzetti) grew 11.3% to $39M with share up 330 bps to 27.4% .
  • Foodservice volumes +4.2% driven by national QSR accounts; strong execution on LTO innovation to support traffic and menu excitement .

What Went Wrong

  • Foodservice PNOC turned slightly unfavorable in Q4 and margins were pressured by incremental outsourcing and supply chain investments, expected to normalize later in FY25 .
  • Retail headline net sales -0.8% and volumes “flat”; perimeter-of-store bakery exit created a ~110 bps drag on quarterly revenue growth .
  • Foodservice volumes came in “slightly below expectations” due to late-quarter traffic deceleration and timing shifts of new-item shipments from Q4 into Q1 .

Financial Results

Headline Metrics – Quarterly Trend

MetricQ2 2024Q3 2024Q4 2024
Revenue ($USD Millions)$485.9 $471.4 $452.8
Diluted EPS ($USD)$1.87 $1.03 $1.26
Gross Margin (%)25.0% 22.2% 21.6%

Q4 vs Prior Year and Consensus

MetricQ4 2023Q4 2024 (Actual)Consensus (Public)
Revenue ($USD Millions)$454.7 $452.8 $462.27
Diluted EPS ($USD)$0.33 $1.26 $1.38
Gross Margin (%)20.5% (21.6% - 110 bps YoY) 21.6% N/A

Notes: Consensus data from public sources due to S&P Global estimates unavailability for LANC; other outlets cited similar ranges (e.g., revenue ~$463.1M, EPS ~$1.40) .

Segment Breakdown – Q4 2024

SegmentNet Sales ($USD Millions) Q4’23Net Sales ($USD Millions) Q4’24Operating Income ($USD Millions) Q4’23Operating Income ($USD Millions) Q4’24
Retail$236.2 $234.2 $10.3 $47.7
Foodservice$218.5 $218.6 $25.3 $19.0
Total$454.7 $452.8 $11.5 $41.7

KPIs – Q4 2024

KPIQ4 2024
Retail volume (pounds shipped)Flat
Retail ex perimeter-store bakery: Net sales+1.4%
Retail ex perimeter-store bakery: Volume+1.2%
Foodservice volume (pounds shipped)+4.2%
Licensed items scanner sales growth (13 weeks)+8%
Refrigerated dressings market share27.4%
Garlic bread category share (New York BRAND)40.6%
New licensed contribution (Subway + TXRH sauces)~$6M; ~3% of net sales

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Volume growth (Retail)FY2025“Continued volume growth” (Q3 color) Low single-digit volume growth Maintained (refined)
Volume growth (Foodservice)FY2025“Sustained volume growth” (Q3 color) Low single-digit; somewhat front-half weighted Maintained (refined)
PNOC (pricing net of commodities)FY2025Flattish commodities; reduced PNOC favorability into Q4; FY25 flattish Neutral PNOC expected Maintained
Tax rateFY2025Q4 tax rate 20.5% ~23% FY2025 Initial FY25
Capital expendituresFY2025FY2024 capex ~$65–$68M $70–$80M FY2025 Raised vs FY2024 actual
Margin outlookFY2025Cost savings + PNOC tailwinds in 1H FY24 Margin improvement primarily via cost savings; back-half loaded Strategy shift (productivity-led)
DividendQ4/FY2025 cadence$0.90/share paid Mar/Jun; 61-year streak $0.90/share declared for Sep 30, 2024; 61-year streak Maintained

Earnings Call Themes & Trends

TopicQ2 2024 (Feb 1)Q3 2024 (May 2)Q4 2024 (Aug 22)Trend
PNOC and commoditiesPNOC strong; gross margin +360 bps; soybean oil/commodities deflation; FY24 back-half PNOC moderating PNOC favorable in Q3, less in Q4; FY25 commodities flattish PNOC slightly negative in Foodservice in Q4; neutral going forward Moderating PNOC; neutral outlook
Licensing momentumSubway/Texas Roadhouse launches; Chick-fil-A strength Strong licensed consumption; pipeline expanding Subway/TXRH drove incremental sales; refrigerated dressings share +330 bps; TXRH rolls pilot Broadening and solidifying
Supply chain/productivityERP winds down; Horse Cave expansion performance Cost savings initiatives; $20M annualized target back Margin improvement to be productivity-led; back-half weighted Execution focus intensifies
QSR demand/trafficFoodservice volumes +4.6%; deflationary pass-through pricing Industry traffic modest slowdown; innovation/LTOs hedge QSR traffic softened late Q4; volumes slightly below internal expectations; LTO timing shift Near-term caution; innovation offsets
Product innovationNew SKUs; managing price points for value Strong LTO cadence; licensing assortment expansion Patent-backed gluten-free Texas toast; TXRH rolls pilot New categories/platforms emerging
M&A readinessFocus on dressings/sauces core; cash build Clearing decks post bakery exit; pipeline in sauces With ERP behind, team “lift and shift” to inorganic growth in FY25 Increasing readiness

Management Commentary

  • “We were pleased to report gross profit growth of 4.8% in the fourth quarter… Excluding the perimeter-of-the-store bakery product lines that we exited in March, Retail net sales increased 1.4% and Retail sales volume… increased 1.2%.” — CEO David Ciesinski .
  • “Gross margins expanded by 110 basis points to 21.6%. The gross profit growth was primarily driven by the company's cost-saving initiatives and increased volumes.” — CFO Tom Pigott .
  • “In fiscal year 2025, we anticipate retail segment sales will continue to benefit from volume growth led by our licensing program… gluten-free garlic bread… and Texas Roadhouse dinner rolls pilot.” — CEO David Ciesinski .
  • “We estimate our fiscal ’25 tax rate to be 23%. For fiscal ’25, our forecasted total capital expenditures are $70 to $80 million.” — CFO Tom Pigott .

Q&A Highlights

  • Foodservice outlook and LTO cadence: Management expects low single-digit volume-led growth; stronger front-half in Foodservice depending on LTO performance; Q4 volumes were slightly below expectations due to traffic and shipment timing .
  • PNOC normalization: Q4 PNOC slightly unfavorable in Foodservice; outlook turning neutral with commodity forecast; margin improvement to come from efficiency gains and reduced outsourcing .
  • Licensing pipeline: Strong performance in Chick-fil-A dressings and sauces; Subway Canada upside; TXRH sauces modest early sales and dinner rolls pilot; broader partner conversations ongoing .
  • Retail price architecture/value: Surgical price investment (e.g., Olive Garden 16 oz at Walmart) to maintain household penetration and value; focus on “affordable luxury” to offset consumer squeeze .
  • Innovation platforms: Patent-backed gluten-free Texas toast expected to be margin accretive relative to existing gluten-free offerings; potential extension to other gluten-free items .

Estimates Context

  • Based on public consensus, Q4 FY2024 revenue and EPS missed: revenue $452.8M vs ~$462.3M consensus; EPS $1.26 vs ~$1.38 consensus. The miss was attributed to deflationary pricing (PNOC headwind in Foodservice) and slightly softer QSR traffic late in the quarter; S&P Global consensus estimates were unavailable via our data tools for LANC .
  • Implication: Given productivity-led margin expansion guidance and neutral PNOC, near-term estimate revisions may reduce revenue/EPS for Q1 FY2025 while maintaining FY25 margin expectations on cost savings execution .

Key Takeaways for Investors

  • Cost savings are the primary margin lever for FY25; expect back-half weighted margin improvements as automation and SAP-enabled productivity initiatives ramp; PNOC neutral reduces price tailwind reliance .
  • Volume outlook low single-digit across segments; Foodservice growth hinges on LTO cadence and QSR traffic normalization; Retail growth aided by licensed items and innovation (gluten-free Texas toast) .
  • Licensing remains a structural growth pillar: strong share gains in refrigerated dressings and garlic bread categories; Subway and Texas Roadhouse add incremental revenue, with TXRH rolls opening a new category .
  • Capital allocation capacity intact: debt-free balance sheet, $163.4M cash at FY-end; capex $70–$80M in FY25 to support productivity and growth; dividend maintained at $0.90/share (61-year streak) .
  • Near-term trading: Miss vs public consensus on top/bottom line likely a modest negative catalyst; watch QSR traffic data and LTO performance in Q1 .
  • Medium-term thesis: Execution on cost savings, licensing breadth, and potential inorganic moves in sauces/dressings can support margin normalization and top-quartile peer growth aspirations .
  • Monitoring items: Commodity basis (soy, eggs) volatility, private label dynamics in bread, and timing of new product resets impacting back-half Retail performance .