The Middleby Corporation (NASDAQ:MIDD) Q1 2024 Earnings Call Transcript

Jeff Hammond: Just want to stay at commercial food. I think you mentioned some permitting delays, customers kind of contemplating strategy. It was interesting that you said you think for the year you’re up mid-single digits in commercial food and that kind of implies high single digit low double-digit growth in the back half. And so just wanted to get a better handle on, if you’re seeing some of these delays kind of move forward and what gives you the confidence in that second half growth rate?

Tim FitzGerald: Yeah. Maybe just to add a little bit of color around delays. I mean I think the world has not fully recovered from supply chain in some regards. I mean, I think as customers have tried to identify locations open locations, right? They’ve got to get through construction, documentation, permitting. Those things have taken a bit longer. We saw that in the back half of the year. So I mean I think those things are improving in terms of just the world normalizing, but that is one of the things that we know that they’ve — a lot of our customers have to struggle that’s delayed. So I think those things get better. I think there’s a little bit of muscle memory as well as customer — the world has kind of gone from crisis management back to strategic execution of business plans and — so I think there’s — we’re in a little bit of a restart.

And I think some of those things cause slowness coming out of the gates plus there’s a lot of just dynamic step people were absorbing, right? Again, interest costs while they’ve been up for a bit here people have been monitoring it and its rates had been higher for that long. And then just where it was pricing on venues because I think a lot of our customers had very favorable overlaps to the pricing that they had put through and were absorbing what was that impact to the consumer. What has been the traffic at the end of the year at the beginning of the year were food costs. So I think they’ve been absorbing a lot of that relative to the plans they had coming to the year and then reauditing those plans. And I think those plans to by and large held up.

And I think it’s just taking a little bit more time to make sure are we doing the right thing and how are we working with our operators et cetera. So I think we still see the strategies out there what they want to execute to. So again, I think that’s where maybe they weren’t ready to go on January 1. But I think those things are still progressing. And I think that kind of gives us some of the confidence in the visibility. So again, why maybe things were — start slow to start not entirely surprisingly and — but while we think the engine will be stepping on the gas pedal as we kind of progress through the next couple of quarters. Please go ahead.

Steve Spittle: Jeff, this is Steve. I’ll just add on to that. I mean I’ve talked about before. Yeah, I think one of the nice byproducts of the last several years there’s a lot more transparency from the chains in terms of new store openings plans. And I’d just say even though as Tim alluded to a little bit slower start from a new store order or a new store build perspective, they pretty much all recommitted several times to their overall plans for the year. So I think that’s what gives us confidence in more of the back half of the year. I think the other thing too I would point out I know we’ve talked about before the dynamic between new store orders and the replacement orders that we feel like have been deferred over the last three, five, seven years.

What’s been exciting is there’s been a number of large chains that have announced initiatives where the Corporate NT [ph] is going to help franchisees do refreshes to build their stores and help them in that replacement cycle. So I think that’s a relatively new nuance. So we think new store builds pick up the back half of the year and we’re still very bullish on this replacement cycle that we feel is going to really kick in over the next couple of years specific to the chain customers.

Jeff Hammond: That’s great color. And then just a couple on [indiscernible] Kitchen One, but can you quantify the onetime KBIS investment? And then it seems like your maybe the destocks done finally in outdoor grills and you feel a little bit better about that but kind of the US indoor kitchen is still maybe one of the choppier areas. Is that correct?

Bryan Mittelman: Yeah. On the KBIS investment I’d put it 150 to 200 basis points of drag in the quarter. Do you want to address that? Market commentary?

Tim FitzGerald: Yeah. No, I think that’s right. I mean we’re — the inventory channel was far or less of an issue. I mean that was true in commercial as well as residential start in the year. So it really starts coming down to end-user demand. Sell-through, probably an outdoor has not been very strong. So it’s kind of a, I’ll say a neutral factor so far. But we’re early in the grill season right? So I think it is what has yet to come as we start moving into spring and summer months. So I think our revenues there will be highly dependent on how real season performs not only through that, but then that will lead into how do we think about the restocking going into 2025 and we do feel like there we’re winning in some areas picking up floor space and the way the grill market works in some of those floor planning that happens right now really is geared toward next year not even this year, so we don’t have to get some of those benefits until later in the year.

With the indoor market, yeah, I mean I think again we’re bouncing along at the trough. While we think a lot of our consumers are really geared, obviously, that upper Echelon in the luxury market and we see some improvement, some of that is a little bit longer lead time. So we’ve seen improvement in order rates and sometimes the remodels and the newbuilds, they don’t need that product next week like they made in the replacement market. So we see some of that starting to pick up. I think the KBIS show was very good for us, because again it was a large investment but we’ve really transformed the portfolio over the last number of years, adding new brands, new products, innovations, colors. So it was very exciting show not only for us as a company but for our channel partners and builders the dealers that came through.