Lancaster Colony Corporation (NASDAQ:LANC) Q2 2023 Earnings Call Transcript

Tom Pigott: So yeah, this is Tom. On the quarter and the margins, one of the things we did see obviously, year-over-year we’ve got quite a bit of commodity inflation. And when you put in $50 million of higher inflationary costs and $50 million of pricing, you get a natural dilution of over 200 basis points on our P&L. So year-over-year, that’s a key driver. Now sequentially, we did see much higher egg costs and a couple of other commodities that resulted in some of the dilution you’re seeing sequentially. But overall, despite those higher costs, we were able to from on a dollar basis offset it and still grow our gross profit in this more challenging environment.

David Ciesinski: And Andrew, if I can maybe go in on Horse Cave, the start-up has gone very much in line with our expectations if not better. So the factory has gone live. It’s up and running in the new section. We’re servicing customers out of that exactly as we had planned. In my prepared comments, I mentioned that we were going to be taking it down in this period for several days and that’s because of the SAP cutover. But I wanted to make sure that you and others understand that. We went out and we said we intended to bring that facility up with that new expansion and that team down there has done a fantastic job. It’s brought it up. And maybe a little bit later in the comments, I’ll talk about new items that we have on the horizon and it’s been a blessing because we’ve seen a resurgence in demand on Buffalo Wild Wings and that new capacity has enabled us to keep up with that surge in demand.

Andrew Wolf: Thank you for that explanation. I’ll get back in the queue and lets some others ask questions. Thank you.

David Ciesinski: Thanks, Andrew.

Operator: The next question comes from Brian Holland with Cowen. Please go ahead.

Brian Holland: Yeah. Thanks. Good morning, gentlemen. If I could just start with the Retail segment top line. It strikes me that the track sales in Nielsen were — grew at about 2x your reported net sales. Curious where the delta comes from? I’m not sure if that’s still a little bit of byproduct of folks working off inventory from the pull-forward in demand or if there’s that SKU rat, which I understood to be more on Foodservice side, but maybe if you could just aggregate the impact of SKU rat on Retail, if there was any?

David Ciesinski: Yes. So you’re exactly right. If you look at the scanner consumption, it was in fact stronger than what we shipped in the period. Honestly, we can’t necessarily speak to whether it was a deload or something else. But generally, we have been shipping to consumption. And it’s just — I would say, it’s just a bit of a timing thing that’s going on there. As we look in on the magnitude of the discontinuations on Retail alone that accounted for several points of growth as well in terms of shipments that are in the mix.

Tom Pigott: Yeah. Brian on the Retail impact, it was a little over 100 basis points. And then I think if you really peel it back, where we saw the biggest disparity in terms of shipments, our revenue versus consumption is obviously Chick-fil-A’s doing extremely well the licensed product. And I think in the prior year period we were still building some inventory. So that may be what you’re seeing.