Hostess Brands posts 17% Q2 growth despite volatile environment

By Gill Hyslop contact

- Last updated on GMT

Hostess Brand's iconic brands have boosted its sales growth, despite 20% inflation and inefficiencies caused by supply-chain fragility. Pic: Hostess Brands
Hostess Brand's iconic brands have boosted its sales growth, despite 20% inflation and inefficiencies caused by supply-chain fragility. Pic: Hostess Brands

Related tags: Hostess brands, Voortman Cookies, Twinkies, earnings report

The maker of America’s No. 1 cupcake, mini doughnut and sugar-free cookie brands reported second-quarter revenue of $340.5m, exceeding Wall Street forecasts.

President and CEO Andy Callahan attributes the company’s 10th straight quarter of double-digit growth to iconic brands, access to faster growing snacking occasions,​ broad-based distribution footprint and excellent execution.”

For the three and six months ended 30 June 2022, the Kansas-based company continued its “top-line momentum”,​thanks to “our team’s timely actions to address the ongoing supply-chain fragility and higher inflation, which pressured our margins in the quarter,”​ said Callahan.

Q2 earnings snapshot

Net revenue increased 16.8%. Higher prices and a favourable product mix accounted for 13.8% of the quarterly growth, with remaining growth attributed to higher volumes.

The company’s Sweet Baked Goods point-of-sale (POS) increased 15.6%, maintaining its share of category dollar sales at 21.7%.

The growing demand for healthier snacks also saw the Voortman sugar-free branded POS grow by 25%, punching up the company’s share of the cookie category.

Gross profit jumped 7.2% to $112.7 – 33.1% of net revenues – or 7.1% to $112.8m on an adjusted basis.

As expected, second quarter gross margins declined by 295 basis points versus year-ago levels, impacted by inefficiencies caused by supply-chain fragility and 20% inflation. Inflation is currently expected to be in the high teens for the full year.

Net income was $30.5m or $0.22 per share, a slight increase from the prior year period, meeting Street expectations.

Hostess expects full-year earnings in the range of 93 cents to 98 cents per share.

Adjusted EBITDA slight 0.7% increase to $68.9m was due to higher operating expenses.

Capital expenditures increased to $41.9m from $22.2m for the same period a year ago. Full year expenditures are expected to be in the $120m-$140m range.

Raises full year sales growth

The company raised full year 2022 net revenue guidance and maintained full year adjusted EBITDA guidance towards the higher end of $280m-$290.

“Our year-to-date results are tracking ahead of our initial expectations and our long-term growth targets, enabling us to raise our full-year net revenue guidance to at least 15% growth while maintaining our full-year EBITDA and EPS guidance,” ​said Callahan.

Related topics: Manufacturers, Biscuits

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