Lancaster Colony Corporation (NASDAQ:LANC) Q4 2023 Earnings Call Transcript

Dave Ciesinski: Well, I think a fair amount. And Alton, I would ladder back to Olive Garden where we started this. If you looked at it in the period, their retail sales in the quarter, so scanner sales were $42 million. And I think they were the original one that people started to look at. And it’s a reflection of several things going on. The blurring of lines between retail and Foodservice and food that’s being consumed off-prem, right? And all of a sudden, these restaurant operators, I think, were less fixed on restaurant versus out of the restaurant and then just the size of the opportunity and how these brands play in retail, particularly after COVID, I think, presented an opportunity to diversify their revenue stream and connect with their consumers in different ways.

So I think Olive Garden was the first of those. But Chick-fil-A was sort of the one that not only did it grow to the size, but as we talked about in the script, it was one of IRI’s pay setters, which means one of their top 10 fastest-growing items in all the food and beverage during the calendar year 2022 and is the fastest-growing food item in 2022. So I think that starts to get other restaurants’ attention. So as we’re looking at this, we continue to see this platform behind licensing and principally restaurant licensing as an opportunity where we can take this great capability that we have around innovation of sauces, dressings, condiments, flavor systems and take those to the marketplace. And we’re not necessarily encumbered by just having a brand.

It allows us to leverage a brand with strong awareness that already exists that’s out there, put that great sauce behind the brand and then deliver it to consumers, and it allows us to overcome the barrier of awareness and trial and repeat more rapidly and get returns instead of betting on the come on marketing spending.

Operator: Our next question will be coming from Connor Rattigan of Consumer Edge. Your line is open.

Connor Rattigan: And I guess it’s worth mentioning, given the news I’m taking this call from a Texas Roadhouse parking lot, so definitely very timely. So I guess I just want to make sure. I’m not sure if I might have missed it, but just circling back to the top line. So obviously, results came in quite a bit below, I guess, our and consensus expectations. I guess can you sort of just kind of maybe walk us through sort of how we got here and maybe what the drag was. And I guess, how did results come in versus your internal expectations? I know you had the $25 million ERP pull-forward headwind. But I guess what exactly was the real top line headwind in the quarter?

Dave Ciesinski: Sure. I think we’re all aware of the pull forward that we had in the prior period that made planning a little bit more challenging. The second biggest item beyond that, and this is targeted at retail, would have been that pipeline build that we had in Q3 that really elevated Q3 that we saw scan through in Q4, right? So I think that would have been the other one. And then I think as we looked at what played out as the quarter went on, we do believe there was a bit of an Easter effect that was in Q3. Now it only shifted about a week this year, but it seemed to have been enough to create a little bit different order pattern between Q3 and Q4 on both our dressings and also on Sister Schubert. So I think those really were the items that created the gap between what you guys were calling for and what we were calling for.

I think it’s also part of the reason why that as we want to think about what the outlook is, right? Some of this period-on-period noise because of SAP finally is going to be behind us. We implemented our last wave, so we’re done. It’s really focusing now on consumption and then shipping to consumption.