Post Holdings CEO: ‘Consumers are still trying to find that historical reference price'

By Elizabeth Crawford

- Last updated on GMT

Source: Getty/	Juanmonino
Source: Getty/ Juanmonino

Related tags Post holdings

Cereal and CPG giant Post Holdings’ fiscal year is off to a strong start despite lower volumes for its retail grocery business in the first quarter as many consumers continue to be “more selective with their spend” in the face of ongoing “significant cumulative inflation and higher interest rates,” CEO Robert Vitale told investors on Friday.

“The business is off to a tremendous start in fiscal ’24 with an exceptional first quarter,” but “our volume story is a bit more of a mixed bag” with the branded retail business suffering volume declines while the company’s value offering benefitted from consumer trade-down and the refrigerated retail side business enjoying “encouraging stabilization,” he explained.

Overall the company reported a 25.5% increase in net sales to reach $1.96bn including $428.9m in net sales from acquisitions in the first quarter over the same time last year. Within North America, net sales were up 79.2% to $988.6m with $426.6m coming from acquisitions.

But most of this increase came from higher prices, not volume, and the company reported a subsequent  drop in earnings of $88.1mn or $1.35 a share for the first quarter ending Dec. 31, down from $91.9mn or $1.52 per share in the same period last year. Still, adjusted earnings of $1.69 a share were above analyst expectations of $1.12 a share.

Volume volatility is a ‘bit of a head scratcher,’ Vitale says

As consumers pulled back on spending the company reported a 6.6% drop in volume in the period in North America, excluding the benefit from acquisitions, over the same time last year. This was driven primarily by declines in branded and non-retail cereal and peanut butter.

And while the company reported that its lower-priced store brand, private label cereals and its value brand Malt-O-Meal performed fine, they were not as high as would be expected during a difficult economic period when consumers typically trade down to save money.

But this go-around is a “bit of a head scratcher in terms of the volume story,” said Vitale, who admitted that if he had to pick an emoji to describe consumer behavior he would pick the shoulder shrug.

“Consumers are still trying to find that historical reference price and are changing behaviors until they can gain some familiarity with the new pricing environment,” he hypothesized.

He added that a drop in Supplemental Nutrition Assistance Program support, formerly known as food stamps, could be a “big component of it,” as could be the resumption of student loan payments.

Competition does not account for shift in consumer demand

He dismissed the idea that volumes could be struggling due to increased promotional activity rom competitors.

“We are seeing fairly normal, what we would consider pre-pandemic levels of promotion. So, there will be pockets of time, as has been the case all through history, that some of our competitors will promote more in certain periods of time than others. But as a general rule, we are not seeing in cereal the promotional landscape being fundamentaly different than what it has been historically,” he explained.

Despite atypical consumer behavior and lower volumes, Post Holdings increased its guidance for the year to an expected adjusted EBITDA in the range of $1.29bn to $1.34bn from $1.22bn to $1.28bn.

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