HANOVER, PA — Utz Brands, Inc., a leading US manufacturer of branded salty snacks, reported its unaudited financial results for Q2, ending July 4.
“In the second quarter, our two-year pro forma net sales growth trends continued to improve as our Power Brands’ sales grew significantly faster than the Salty Snack Category in our Emerging and Expansion geographies, and our channels most impacted by COVID-related softness are rebounding,” said Dylan Lissette, CEO of Utz. “While consumer demand for our products remains strong, our second quarter margins were significantly impacted by higher-than-planned inflation across key input costs which include commodities, transportation and labor.”
The company’s Pro Forma Net Sales increased 6.1% on a two-year CAGR, which is an improvement from 4.3% in the first quarter. But as the company grows, Lissette understands that Utz — like the rest of the snack food industry — must leverage the pandemic-induced inflation and supply chain shortages with a longer-term view of the company’s future.
“We anticipate these costs will continue to be more elevated for the remainder of the year than we previously expected,” Lissette said. “Our pricing actions and productivity initiatives are well underway, but the benefits are expected to be weighted towards the back half of 2021, lagging the near-term cost pressures. These benefits, however, are expected to have strong carry-over benefits to fiscal 2022. As we manage through these higher costs, we remain focused on the long-term health of our brands, and we continue to prioritize investments to capitalize on our growth opportunities.”
Growth highlights
For the 13-week period ending July 4, 2021, the company’s retail sales as measured by IRI MULO-C increased 6.5% on a two-year CAGR. The company’s Power Brands’ retail sales increased 8.1% on a two-year CAGR vs. the salty snack category’s growth of 7.1% for the same period, increasing to nearly 87% of sales versus approximately 84% in that period during 2019. Power Brands’ sales growth during that time was led by Utz, ON THE BORDER, Zapp’s, TORTIYAHS!, Golden Flake Pork Skins, Hawaiian, TGI Fridays and Herdez. As expected, the two-year CAGR retail sales decline of (2.2%) in Foundation Brands reflects the company’s strategy to focus its resources on those Power Brands.
“…our Power Brands’ sales grew significantly faster than the Salty Snack Category in our Emerging and Expansion geographies, and our channels most impacted by COVID-related softness are rebounding,” said Dylan Lissette, CEO of Utz.
Looking ahead: Fiscal year 2021 outlook
Utz believes that consumer demand for its products will remain strong in the second half of fiscal 2021 and that sales growth will accelerate. However, given the challenging industry-wide supply chain dynamics, the company is experiencing higher commodity, transportation and labor costs. The rise began in the first quarter of fiscal 2021 and continued in the second quarter, impacting Utz’s profitability more than anticipated.
While costs may remain elevated for the remainder of fiscal 2021, Utz indicated it is taking appropriate actions to offset the impact, including pricing, productivity and cost-savings actions, but the benefits are expected to be weighted toward the back half of the year. These benefits are not expected to fully offset the incremental supply chain costs already incurred during fiscal 2021, as well as costs expected to occur during the second half of fiscal 2021. As a result, the second quarter may be the lowest-margin quarter of fiscal 2021, and that profitability will improve in the second half of the year.
These actions could offset inflationary pressures for meaningful carryover benefit to fiscal 2022, according to the company.
For the 52-week fiscal year ending Jan. 2, 2022, Utz updated its full-year outlook previously provided in May to reflect the increased supply chain cost inflation. Utz now expects an EBITDA of $160 to $170 million and adjusted earnings per share of $0.55 to $0.60.
