Marzetti Q4 2025 Earnings Report

Marzetti EPS Results

• Actual EPS: $1.33
• Consensus EPS: $1.31
• Beat/Miss: Beat by +$0.02
• One Year Ago EPS: $1.34

Marzetti Revenue Results

• Actual Revenue: $475.43 million
• Expected Revenue: $455.26 million
• Beat/Miss: Beat by +$20.17 million
• YoY Revenue Growth: +5.00%

Marzetti Announcement Details

• Quarter: Q4 2025
• Date: 8/21/2025
• Time: Before Market Opens
• Conference Call Date: Thursday, August 21, 2025
• Conference Call Time: 10:00AM ET

Lancaster Colony Corporation engages in the manufacturing and marketing of specialty food products for the retail and foodservice channels in the United States. It operates in two segments, Retail and Foodservice. The company offers frozen garlic bread under the New York BRAND Bakery; frozen Parkerhouse style yeast and dinner rolls under the Sister Schubert's brand; salad dressings under the Marzetti (NASDAQ:MZTI), Simply Dressed, Cardini's, and Girard's brands; vegetable and fruit dips under the Marzetti brand; croutons and salad toppings under the New York BRAND Bakery, Chatham Village, and Marzetti brands; and frozen pasta under the Marzetti Frozen Pasta brand. It also manufactures and sells other products to brand license agreements, including Olive Garden dressings, Buffalo Wild Wings sauces, and Chick-fil-A sauces. The company sells its products through sales personnel, food brokers, and distributors to retailers and restaurants. Lancaster Colony Corporation was incorporated in 1961 and is based in Westerville, Ohio.

Marzetti Q4 2025 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Record full-year results with record high net sales, gross profit, and operating income driven by strong volume growth and premium brand performance.
• Positive Sentiment: Retail segment net sales increased 3.1% to a fourth-quarter record $241.6 million, led by licensing expansions and marketing investments that drove household penetration and market share gains across key frozen bread and sauce categories.
• Positive Sentiment: Consolidated gross margin expanded 70 basis points (130 bps excluding non-core sales) as higher volume, mix improvements, and cost-saving programs enhanced profitability.
• Negative Sentiment: Selling, general and administrative expenses rose 16.7% due to increased marketing, personnel and legal costs plus $5.1 million of restructuring and impairment charges for the planned Milpitas facility closure, partially offsetting operating income growth.
• Positive Sentiment: Debt-free balance sheet with $161.5 million in cash, a 6% dividend increase to $0.95 extending a 62-year dividend streak, and FY26 outlook of low single-digit revenue growth supported by modest cost inflation offsets and ongoing supply chain investments.

Presentation

[Operator]

Good morning. My name is Liz, and I will be your conference call facilitator today. At this time, I would like to welcome everyone to the Marzetti Company's Fiscal Year twenty twenty five Fourth Quarter Conference Call. Conducting today's call will be Dave Ciezinski, President and CEO and Tom Pigott, CFO. All lines have been placed on mute to prevent any background noise.

[Operator]

After the speakers have completed their prepared remarks, there will be a question and answer Thank you. And now to begin the conference call, here is Dale Ganopsic, Vice President of Corporate Finance and Investor Relations for The Marzetti Company.

[Dale Ganobsik, VP - Corporate Finance, IR & Treasurer at Lancaster Colony]

Good morning, and thank you for joining us today for the Marzetti Company's fiscal year twenty twenty five fourth quarter conference call. Formerly known as Lancaster Colony Corporation, our business rebranded as the Marzetti Company effective June 27. This rebranding honors the 01/1930 history of our flagship Marzetti brand and signals our future as a food company with an ongoing commitment to delivering high quality, flavorful products that make every meal better. While Lancaster Colony will always be an important part of our heritage, we believe the Marzetti name is critical to positioning our business in today's food industry and communicating the value we deliver to all of our stakeholders. Please note that our discussion this morning may include forward looking statements, which are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. These statements are subject to a number of risks and uncertainties that could cause actual results to differ materially, and the company undertakes no obligation to update these statements based upon subsequent events. A detailed review of these risks and uncertainties is contained in the company's filings with the SEC. Also note that the audio replay of this call will be archived and available on our website investors.marzennicompany.com later today. For today's call, Dave Ciezinski, our President and

[Dale Ganobsik, VP - Corporate Finance, IR & Treasurer at Lancaster Colony]

CEO will begin with the business update and highlights for the quarter. Tom Pigott, our CFO will then provide an overview of the financial results. Dave will then share some comments regarding our current strategy and outlook. At the conclusion of our prepared remarks, we'll be happy to respond to any of your questions. Once again, we appreciate your participation this morning.

[Dale Ganobsik, VP - Corporate Finance, IR & Treasurer at Lancaster Colony]

I'll now turn the call over to the Mars Eddie Company's President and CEO, Dave Ciezinski. Dave?

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Thanks Dale, and good morning everyone. It's a pleasure to be here with you today as we review our financial results and provide you with an update on our business. Before I provide comments on our fiscal fourth quarter results, I am pleased to share that we completed fiscal year twenty twenty five, which ended June 30 with record high net sales, gross profit and operating income. I want to extend a sincere thank you to all of our teammates throughout our business for their countless contributions to this achievement, as well as their continued commitment to our ongoing success. Moving on to our results for our fiscal fourth quarter, which ended June 30, we are pleased to report that consolidated net sales grew 5% to a fourth quarter record $475,400,000 and gross profit advanced 8.7% to a fourth quarter record $106,100,000 In our retail segment, net sales increased 3.1% to 241,600,000.0, driven by growth from both our licensing program and our own brand.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

During the quarter, we increased our marketing investments with proven strategy and noted improved household penetration trends for our brands in several key categories. In licensing, sales growth was led by expanding distribution for our popular Texas Roadhouse dinner rolls and new club channel sales for Chick fil A sauce. Buffalo Wild Wings Sauce has also added to the growth of our licensed items. Our category leading New York bakery frozen garlic bread remained a key contributor to the growth of our retail segment, driven by contributions from our recently introduced gluten free Texas toast. Our Sister Schubert's brand frozen dinner rolls also performed well, including the benefit of the later Easter holiday that shifted some sales into the fiscal fourth quarter.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Excluding all sales attributed to the perimeter of the store bakery items that we just exited in fiscal year twenty twenty four, the retail segment's fourth quarter net sales increased 3.6% and retail sales volumes measured in pounds shipped increased 2.9%. Circana scanner data for the quarter ending June 30 showed strong results with both sales dollars and volume for our branded products up 5.5%. In the frozen dinner roll category, our own Sister Schubert's brand and our licensed Texas Roadhouse brand combined to grow 52.4%, resulting in a market share increase of six ninety basis points to a category leading market share of 63.8%. And the frozen garlic bread category, our New York bakery brand continues to perform very well as sales grew 10% versus a 3.5% increase for the category, driving New York Bakery's market share up two sixty basis points to a category leading 43.3%. In the shelf stable sauces and condiments category, sales of Chick fil A sauce grew 17.2%, with market share up 30 basis points, as we introduced the popular sauce into the club channel during the quarter.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

In the produce dressing category, sales of Chick fil A dressings grew 2.6. When combined with our Varzetti brand dressings, our market share totaled a category leading 27.6%. In the food service segment, excluding non core sales attributed to a temporary supply agreement, sales improved 1.4%, while sales volume declined 1.7%. In addition to the benefit of inflationary pricing, food service segment net sales reflect increased demand from some of our national chain restaurant account customers, as well as sales gains for our own Marzetti branded food service products. Our focus on supply chain productivity, value engineering and revenue management, all remain core elements to further improve our margins and financial performance.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

I'll now turn the call over to Tom Pigott, our CFO, for his commentary on our fourth quarter results. Tom?

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

Thanks, Dave. Overall, this quarter, the company delivered improved top line and gross margin performance, and continued to invest to drive growth. Fourth quarter consolidated net sales increased by 5% to $475,400,000 Breaking down the revenue performance, higher core volume and product mix drove 190 basis point increase.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

Net pricing was accretive by approximately 60 basis points. In addition, the company reported $12,200,000 in sales or two seventy basis points of growth that resulted from a temporary agreement with Windland Foods, the seller of the Atlanta based manufacturing facility that we acquired in mid February. We entered into this agreement to facilitate the closing of the transaction. It's important to note that these temporary and non core sales are expected to end by March '26. And finally, last year's exit of the perimeter of the store bakery product lines accounted for a 20 basis point decline.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

Consolidated gross profit increased by $8,500,000 or 8.7% versus the prior year quarter to $106,100,000 and gross margin expanded by 70 basis points. The gross profit growth was driven by higher volume and mix in our retail segment and our ongoing cost savings programs. Note that excluding the $12,200,000 in sales from the temporary supply agreement, which did not contribute to gross profit, gross margin expanded by 130 basis points. Selling, general and administrative expenses grew $8,900,000 or 16.7 percent. This increase reflects a higher marketing spend in our retail segment to drive growth, higher personnel costs, increased legal spend, and costs related to the integration of the Atlanta facility.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

During the quarter, the company reported $5,100,000 of restructuring and impairment charges. Dollars 4,500,000.0 of the charges are attributed to the planned closure of our sauce and dressing facility in Milpitas, California that we announced last quarter. This closure is part of our ongoing initiatives to optimize our manufacturing network. Production at that facility is expected to conclude during the quarter ended September 30. In our prior year quarter, restructuring impairment charges of $2,700,000 were attributed to our decision to exit our perimeter of the store bakery product lines.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

Consolidated operating income decreased $2,800,000 due to higher SG and A expenses and increased restructuring impairment costs, partially offset by the improved gross profit performance. Our tax rate for the quarter was 19.7% versus 20.5% in the prior year quarter. We estimate our tax rate for fiscal 'twenty six to be 23%. Fourth quarter diluted earnings per share decreased to $08 or 6.3% to $1.18 The restructuring impairment charges I mentioned reduced EPS by $0.15 in the current year quarter and $08 in the prior year quarter. In the current year quarter, we also incurred the last of our Atlanta facility integration costs in the SG and A line, which accounted for $01 per share.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

With regard to capital expenditures, our payment per property additions totaled $58,000,000 for the full year. In addition, we invested $78,800,000 to acquire the Atlanta based dressing and sauce facility. For fiscal twenty six, we are forecasting total capital expenditures of between 75,000,000 and $85,000,000 We will continue to invest in both cost savings projects and other manufacturing improvements, as well as the newly acquired Atlanta facility. In addition to investing in our business, we also returned funds to shareholders. Our quarterly cash dividend of $0.95 per share paid on June 30, represents a 6% increase from the prior year's amount. Our enduring streak of annual dividend increases stands at sixty two years. Our financial position remains strong, with a debt free balance sheet and $161,500,000 in cash. In regard to the full year results, overall, the company delivered against its growth algorithm.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

Net sales grew 2%, primarily driven by volume. Gross margins expanded by 80 basis points due to cost savings initiatives and some modest cost deflation. Reported operating income grew 10.5%. When you adjust operating income for restructuring impairment costs recorded in both years, the current year's acquisition costs, as well as last year's inventory write down for business exit, operating income was up 5.7%. This growth was driven by higher volumes and the gross margin expansion.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

To wrap up my commentary, our fourth quarter and full year results demonstrate strong execution across a number of areas in a more difficult operating environment. In addition, we continue to make investments to support further growth and cost savings. I will now turn it back over to Dave for his closing remarks.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Thank you. Thanks, Tom.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Going forward, the Marzetti company will continue to leverage the combined strength of our team, our operating strategy and our balance sheet in support of the three simple pillars of our growth plan. To one, accelerate core business growth. Two, to simplify our supply chain to reduce our cost and grow our margins. And three, to expand our core with focused M and A and strategic licensing. Looking ahead to fiscal year twenty twenty six, we anticipate retail segment sales will continue to benefit from volume growth with contributions from both our licensing program and our core Marzetti, New York Bakery and Sister Schubert brands.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

The popular Texas Roadhouse dinner rolls will begin shipping nationally to all major retailers this fall. And we also have some new items planned for our core brands that will launch in the year ahead. In the food service segment, we expect sales to be supported by growth from select QSR customers and our mix of national chain restaurant accounts. As our culinary team continues to provide our food service partners with a wide range of innovation initiatives and craveable flavors to help them drive menu excitement and ultimately traffic growth. Like many of you, we continue to monitor external factors, including US economic performance and consumer behavior that may impact the demand for our products.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

With respect to input costs in the aggregate, we anticipate a modest level of cost inflation in 2026, that we plan to offset through contractual pricing and our cost savings programs, as we remain focused on continued margin improvement in the year ahead. We also look forward to incorporating our newly acquired Atlanta based sauce and dressing plant into our manufacturing network. When combined with the closure of our sauce and dressing facility in Milpitas, California that we announced last quarter, We believe our supply chain is well positioned to cost effectively support the growth of our key customers in fiscal year twenty twenty six and beyond. This concludes our prepared remarks for today, and we'd be happy to answer any questions that you might have. Your

[Operator]

Your first question comes from Jim Salera with Stephens.

[Jim Salera, Research Analyst at Stephens Inc]

Hi, Tom. Good morning. Thanks for taking our question. Dave, wanted to start some thoughts around food service because there's a lot of noise right now around the consumer. It seems like there's certain QSR platforms that are really focusing on value, but other ones that continue to do well kind of despite the backdrop.

[Jim Salera, Research Analyst at Stephens Inc]

And a lot of the menu innovation seems to be more focused around chicken, which I would anticipate benefits your business. So can you maybe just walk us through as we think about FY 2026? What are your expectations around QSR industry traffic as a whole and then innovation for the accounts that you service and maybe how we put that all together to come up with expectations for the foodservice business in '26?

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Yeah, well, great question, Jim. And maybe I'll start by framing it as follows. If you go back, let's say eighteen months or a year ago, the industry was still wrestling with inflation and passing through pricing. And I think that pricing that went through created value issues for a range of consumers, particularly consumers in the middle and the lower incomes. This started to manifest itself in trade down.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

I think as we've rolled forward now, most of the operators have cycled past that pricing. And as we look at our core operators, we can see that they're not passing through pricing like they've had. And I would tell you as a whole, it looks like commercial food service has modestly, is either flat or very modestly improving within, let's say the last couple of months. But when I say modestly, I mean about one point, approaching closer to flat. Now within there, it becomes somewhat divergent and a little bit different than we've seen in prior periods.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

We're seeing segments with higher price points like casual dining that are struggling a little bit more and you've read about that. I know you follow the space. You're seeing the casual dining guys, the likes of Chili's and even Applebee's starting to perform a little bit better as they've really focused on simplifying their menu, their back of house operations, and striving to give consumers value. In the QSR space, I think we've seen them over the last, let's say three quarters struggle with getting on the better side of pricing. And now we're starting to see their traffic get closer to flat overall.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

And that's in fact true with a lot of our customers. It's still below what we would have seen historically, but I would tell you it's modestly improving. As we go forward, what we would expect is neither a catalyst for a significant downturn nor a significant improvement. I think we're just going to continue to operate in this sort of broader macro environment. Now, bring it closer to us, where is it that we're going to find pockets of growth?

[David Ciesinski, President, CEO & Director at Lancaster Colony]

I think there are several themes that remain true. One is you're going to see these operators continue to look for ways to present value. In the casual dining space, the Chili's and guys like that, I think you're going to see them continue to hover around meals at the $15 mark to attract guests and then look to plus that up with incremental items. In QSR, I wouldn't be surprised if we see things like what McDonald's has done around snacking and with chicken. And then I think the trend that really is going to continue to benefit us is going to play probably a couple of ways, and it's in chicken.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

The chicken operators continue to do better than most of the others, let's say hamburger, etcetera. So I think that's going to present an opportunity for continued growth and an opportunity for us to continue to innovate with those operators that are out there. I also think I didn't talk about pizza QSR. I think pizza QSR will continue to be relevant, particularly as they focus on absolute price points. At the end of the day, consumers I think are trying to balance their sources and uses of cash And they're still looking for affordable ways to feed their family and find sources of happiness.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

And I think food service will continue to factor into that. The onus is on us to figure out ways to help these operators present that and grow.

[Jim Salera, Research Analyst at Stephens Inc]

That's great. Then Tom, if I could ask one of you on the commodity side, sounds like you guys have a pretty robust productivity program coming, continuing into FY '26. We've heard some commentary around soybean oil specifically and and potential supply crunch there with some of the domestic production going towards biofuels. And I'm no commodity expert, but I know if I just look at the spot price for soybean oil, it's up pretty significantly year to date and it kind of took a leg up more recently when the EPA announced some news around biofuels. So you just give us any thoughts around your visibility into soybean oil pricing?

[Jim Salera, Research Analyst at Stephens Inc]

If you're able to tell us how much of the commodity basket that is for you guys? If you're hedged, just kind of any thoughts around that and potential variability as we go into the new year and have kind of this biofuel demand that could potentially pull?

[David Ciesinski, President, CEO & Director at Lancaster Colony]

So Jim, it's a great question. It's an important part of our commodity basket. Maybe I'll lead off and then let Tom get into some of the specifics as well. As you noted over the last probably seven or eight years, we've started to see soybean oil play a more prominent role in renewable diesel. As we got to the end of the Biden administration, there was somewhat some uncertainty regarding how much volume would be renewed in RVOs or the amount of gallons that are going to go towards renewable diesel.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Earlier this summer, the EPA came out with guidelines that elevated the soybean oil being diverted into renewable diesel. To your point, it resulted in a spike. Up until that point on the board, it was probably trading, I would say in the mid forties or thereabout. And then it jumped into the mid 50s. It got up to as high as $0.55 And now it's eased off.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

I looked at it this morning actually on the board, and it was about $0.51 There are still a couple of areas that have yet to be resolved in this space that I think could ultimately dictate where the price nets out. Ordinarily, what they do is they allow an exception for small refiners. And if they continue to grant that exception, what you might see is those commodity costs for soybean oil continue to fall back a little bit more. So it remains within our expectations. So we don't see it as a near term headwind for our business.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

We do take hedging positions with our suppliers on this. And maybe with that, I'll turn it over to Tom and he can provide you with a little bit more.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

Yeah, I think Dave said on the broader market indicators, and what I would share with you is that we do have we do utilize a consultant to help us analyze this market because it's very complex. And we have a team that goes out and takes positions when we think they're advantageous to us. So as we look at the total cost as a percent of our COGS, soybean oil is about 10%, depending on the market at that point.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

And in terms of our outlook for next year, from our internal cost projections, based on the current markets and our hedging positions, it's neither a big headwind or tailwind for us.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Yeah, we've been layering in on this for a while, Jim, anticipating this. So these changes aren't anything new. Just to give you an idea, we went back seven years ago, took a bean and you crushed it. The meal went to feed essentially chickens and cattle and hogs and everything else.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

And the oil then would be diverted into the food supply. Now, virtually half of that oil is being directed into renewable diesel. So this is sort of a phenomenon that we've been watching here very carefully and not only do we buy for ourselves, but we sit down on a regular basis with all of our big customers and QSR space, and we advise them and work with them to take positions as well, so we can create an element of predictability with this important commodity.

[Jim Salera, Research Analyst at Stephens Inc]

Great. Well, I appreciate all the detail, guys. I'll hop back in the queue.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Thanks, Jim.

[Operator]

Your next question comes from Todd Brooks from The Benchmark Company.

[Todd Brooks, Equity Research Analyst - Restaurants & Packaged Foods at The Benchmark Company LLC]

Hey, good morning. Thanks. Two questions for me as well. First, if we can look at the G and A spend, I know we talked about some incremental marketing investment behind the retail operation. I think you called out about $500,000 of onetime costs related to the new facility.

[Todd Brooks, Equity Research Analyst - Restaurants & Packaged Foods at The Benchmark Company LLC]

I'm just wondering, I'm seeing kind of 140 basis point uptick year over year. How much of that was the marketing spend? And were there some other one time items around the corporate name change or anything that didn't get called out in the release? And how should we think about maybe a normalized type of percent of sales spending for G and A as we think about fiscal twenty twenty six?

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

Great question, Todd. So the spend was up for three factors. One was the marketing, which was almost half of the increase, and I'll let Dave talk to that. Other two drivers were, as you mentioned, the Atlanta integration and the legal costs. Those are more transient items.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

We don't expect them to continue. And then the third driver is some timing of costs from Q3 that flowed into Q4. So broadly, we don't expect to grow that line more than inflation, we're very happy with the reinvestment we made into the marketing spend. I'll let Dave talk a little bit about that.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Yeah, so as Tom pointed out, half of it was directed into marketing.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Essentially what we're doing, Todd, is we have a new leader in the marketing organization that's doing a great job digging into the data that we have and looking at the digital tools at our disposal. And we invested in some very specific programs that helped us drive household penetration. If you look across our shares, we were up share wise in five of our seven categories. And I'll give you sort of anecdotally why we feel good about it. You look at our own Texas toast brand, right now we ended the quarter with about a 43 share.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

With that product, our household penetration was up eight points in the quarter. And our repeat rate on that item is almost 60%. And our belief continues to be, if we can make smart marketing investments at reasonable prices, and we can drive household penetration, the performance of that product keeps those consumers in the fold and allows that business to continue to grow period on period. And we took that same sort of formula and we use it across a range of different products in a very point specific basis. And we think it's along with innovation going to be an part of our overall algorithm that allows us to deliver profitable volumetric growth.

[Todd Brooks, Equity Research Analyst - Restaurants & Packaged Foods at The Benchmark Company LLC]

That's great. And then just a follow-up on that Tom, before I get to the other question. When we talk about kind of growth in line with inflation for 'twenty six, what's the normalized base that we should be thinking about growing that off of?

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

I would take the reported number, pull out the Atlanta integration costs and that would be your base.

[Todd Brooks, Equity Research Analyst - Restaurants & Packaged Foods at The Benchmark Company LLC]

Perfect. Thanks. And then my second question, and you talked about this as one of your offsets for the moderate inflation that you're expecting in fiscal twenty twenty six. Can we talk to and this is something you've long been expert at, the cost savings that the team was able to realize in 'twenty five? And then the outlook for 'twenty six on cost savings, just thinking that we've got some probably chunkier opportunities around the Milpitas exit and ramping that volume to the right spots in the rest of the sauce and dressing production system?

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

Yes, so when you look at '25, the team did an outstanding job against a number of pillars procurement, savings, negotiating more favorable contracts for us, value engineering, which is optimizing our products to make them more efficient and less costly to produce, labor management. We also benefited from the SAP implementation as we got better information on our costs. So a number of things contributed to the performance that the team was able to achieve in 'twenty five. As we look forward into 'twenty six, what I would add to that list is the network reset that we're doing. So essentially between closing the Milpitas facility and ramping up College Park, that gives us another pillar to drive cost savings into 'twenty six.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

And I think as we look at it, right now we're in the midst of that transition. So we're decommissioning lines in California, commissioning lines in Atlanta, and moving volume into Horse Cave as well. There's a lot of change going on right now in our networks, we're executing well against those. As we get into the back half of fiscal 'twenty six, I think we'll begin to see more of those benefits flow through to our margin as the year progresses.

[Todd Brooks, Equity Research Analyst - Restaurants & Packaged Foods at The Benchmark Company LLC]

Okay, great. Thank you both.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

Thank you, Todd.

[Operator]

Your next question comes from Alton Stump from Loop Capital.

[Alton Stump, MD - Equity Division at Loop Capital Markets LLC]

Great. Thank you. Good morning, and thanks for taking my question as always. Just to clarify, from a modeling perspective, of course, you mentioned, Tom, that debt free slide agreement will go through March, obviously, the first three fiscal quarters. Should we kind of think about the revenue contribution from that similar to what it was in most recent 4Q?

[David Ciesinski, President, CEO & Director at Lancaster Colony]

You're referring to the temporary supply agreement that we have and the rate of sales on Yes, consistent throughout the first three quarters. So our preference would be that you exclude that revenue from your model, just because it's temporary and non core, and project off of a more organic number, which would exclude that revenue.

[Alton Stump, MD - Equity Division at Loop Capital Markets LLC]

Got it. Okay. Okay. Thank you for that on the modeling front. And then, I guess just fundamentally, there's obviously a lot of mixed signals as far as the consumer.

[Alton Stump, MD - Equity Division at Loop Capital Markets LLC]

You guys, of course, have an off a good view of things because, of course, your foodservice business has a benefit when consumers eat more at home and whereas obviously retail well, I'm sorry, vice versa that your foodservice benefits and people are eating out more. Where's your retail benefits when they're staying at home eating more? So I guess, as you kind of look at that overall dynamic, how do you think the consumer environment will impact each of your businesses separately?

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Well, maybe I'll take a shot at that and Tom can add. As we kind of roll our way through the end of this calendar year and we go into the next, as long as we don't see things like inflation spike, I think there are two things that could be potential catalysts for tailwinds. One is the fact that we see interest rates start to recede. I think that could be a net benefit. I think the other is we're watching crude oil prices and gas prices, which remain flat to down.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

If they continue to pull back, I think we've seen in the past that gives consumers discretionary spending to be able to use on eating out or spending more to eat at home. The other is, and we've read a fair amount about the fact that with the OB3, the one big beautiful bill, the sense is when we get into the calendar year, there's going to be potentially tax benefits to consumers that could give them an incremental discretionary spending to use. So I think as we look into the future, we're cautiously optimistic that the consumer might start to see some modest tailwinds as long as we can keep inflation in check. You come around then and you say, what does that mean to our business overall? I would expect to see the food service situation continue to sequentially improve for all of our customers really. And I think as long as we remain in this sort of value environment, there's going be winners and losers. And I think that we tend to line up more with the winners. I think on the retail business, sort of independent of the macro environment, we're excited about the pipeline of new items that we're bringing to the marketplace. We're just now starting to roll out Texas Roadhouse rolls to all of retail.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

We think that's going to be a source of continued growth for our business. We have a range of other new items for Texas toast and Sister Schubert that we're excited about. We have a new item of Olive Garden Azesti Italian, which allows us to attack a part of that category that we don't play in today, which we think is just growth waiting for us. So we have kind of a continuation of different pockets that we're working on that allow us to look at the environment as it stands today without a material change and see line of sight to low single digit volume lead growth. If the environment gets better, particularly in food service, well, we'd be happy to go back and revisit those numbers, but that's kind of our view right now.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

And I would say the consumer has proven to be resilient so far. And I think adaptable organizations, CPG organizations are in tune with that. They're figuring out how to meet those consumers' needs and the good ones will figure out how to grow.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

Yeah, I'll just add overall, I think we expect '26 just to be a continuation of our growth algorithm where we see revenue growing in the low single digit, really driven by volume in retail, and some pricing for the egg commodity. Foodservice, I think we're looking at more of a flattish profile in 'twenty six.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

And then on the gross profit, we expect to continue to grow our margins probably in the around the 50 basis point range and SG and A, as I mentioned, growing with inflation. So that's kind of the broader outlook to power forecasting '26. Which gets us overall to low single digit on the top line, mid single digit on the bottom line, sort of a continuation of our outlook for this year.

[Alton Stump, MD - Equity Division at Loop Capital Markets LLC]

Great. Thank you so much, Tom and Dave, for all of the color. I'll hop back in the queue.

[Dale Ganobsik, VP - Corporate Finance, IR & Treasurer at Lancaster Colony]

Thank you all.

[Operator]

Your next question comes from Scott Marks from Jefferies.

[Scott Marks, Equity Research - Consumer at Jefferies]

Hey, good morning, guys. Thanks for taking our questions.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Hey, thanks. Wanted Good

[Scott Marks, Equity Research - Consumer at Jefferies]

to ask just one technical question. As it relates to the $5,000,000 restructuring charges, were those associated with the retail segment, or were they kind of unallocated?

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Those were unallocated, yeah. Unaallocated. And that would be disclosure, because it includes both segments in that facility.

[Scott Marks, Equity Research - Consumer at Jefferies]

Okay, understood. And I guess that leads me into my next question on the retail segment, which is, obviously put up a pretty good top line number, but I think profitability came in a little bit below what some folks were looking for, and it sounds like there was some incremental marketing expense that was kind of the reason for that. So how do you think about, or how should we be thinking about the marketing investments that you spoke to? I know you spoke about change in leadership on that part of the business, some incremental investments upfront. Should we anticipate maybe some higher spend upfront with the expectation that growth will come down the line?

[Scott Marks, Equity Research - Consumer at Jefferies]

Just trying to gauge the right level of profitability for this segment that we should be kind of thinking about going forward.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

Yes, so it's an excellent question, and you're right, we did choose to take advantage of some good potential programs to invest in in the quarter, and it did impact retail's profitability. There are a couple other things I'll mention, then I'll let Dave talk a little bit about the marketing spend. The other thing on retail is we had a very difficult comp this particular quarter. The prior year quarter was a record Q4 on operating income for the retail segment. And then the other thing that impacted the profitability was this particular quarter, PNOC was a little bit negative due to the ag inflation.

[Tom Pigott, Chief Financial Officer at Lancaster Colony]

In time, we expect that PNOC to balance out. So that's kind of some additional color on the retail operating income line. I'll let Dave talk a little bit about the marketing spending and how we're thinking about it.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Yeah. So Scott, bring it around to you, we don't expect a reset on marketing for the retail segment.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

We saw an opportunity in this period to raise it. And I think as we continue to generate cost savings in other areas of the P and L, I think we're going to look for opportunities to plow some back into the business longer term. And I think to Tom's point on this business, I would expect our operating margins to remain in line here. So if you're looking at both gross margins and operating margins over the foreseeable future, we expect those to be flat or grow in line with our productivity programs.

[Scott Marks, Equity Research - Consumer at Jefferies]

Understood. Thank you for that. And then maybe one on the food service side. I know last quarter you called out the impact from some larger customers of yours who kind of pulled back on some LTOs. As we think about this quarter's performance, down 1.7% on the volume side, excluding those TSA sales, is that does that mean that those kind of like one off headwinds were still in there, but you saw growth elsewhere in the portfolio?

[Scott Marks, Equity Research - Consumer at Jefferies]

Just trying to gauge how we should be thinking about the volume trajectory on a go forward basis as it relates to impact from those LTO reductions versus other potential wins and business opportunities?

[David Ciesinski, President, CEO & Director at Lancaster Colony]

You're precisely right. That's exactly what that is. So we did see favorability with some of our other customers that was able to offset some of that. So as we sort of work our way through this, you can expect to see us begin to lap those headwinds as we get to the back part of the year. And if you look at it, we saw growth from a handful of our QSR customers and we continue to see growth with the branded part of our portfolio, which is our own Marzetti branded items that we sell through distributors.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

So, and if you look at the pipeline that we have of new items and the traffic performance of our existing customers, we would expect to see those trends continue.

[Scott Marks, Equity Research - Consumer at Jefferies]

Understood. Thanks so much. I'll pass it on.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Thank you. Thank you.

[Operator]

If there are no further questions, we will now turn the call back to Mr. Ciesinski for his closing comments.

[David Ciesinski, President, CEO & Director at Lancaster Colony]

Well, you everybody for joining us today. We look forward to being back together with you in November as we share with you our results for the first quarter of this fiscal year. We look forward to seeing you guys on the road. Take care.

[Operator]

This concludes today's conference call. Thank you for participating. You may now disconnect.

Participants

Executives

• David Ciesinski, President, CEO & Director

Analysts

• Dale Ganobsik, VP - Corporate Finance, IR & Treasurer at Lancaster Colony
• Tom Pigott, Chief Financial Officer at Lancaster Colony
• Jim Salera, Research Analyst at Stephens Inc
• Todd Brooks, Equity Research Analyst - Restaurants & Packaged Foods at The Benchmark Company LLC
• Alton Stump, MD - Equity Division at Loop Capital Markets LLC
• Scott Marks, Equity Research - Consumer at Jefferies