Simply Good Foods’s (NASDAQ:SMPL) Q1 Sales Top Estimates
April 9, 2025
Packaged food company Simply Good Foods (NASDAQ:SMPL) reported revenue ahead of Wall Street’s expectations in Q1 CY2025, with sales up 15.2% year on year to $359.7 million. Its non-GAAP profit of $0.46 per share was 14.7% above analysts’ consensus estimates.
"I am very pleased with our second quarter and first half results. We are executing well, adding new doors, winning with innovation, and driving brand awareness and household penetration of our brands" said Geoff Tanner, President and Chief Executive Officer of Simply Good Foods.
Company Overview
Best known for its Atkins brand that was inspired by the popular diet of the same name, Simply Good Foods (NASDAQ:SMPL) is a packaged food company whose offerings help customers achieve their healthy eating or weight loss goals.
Shelf-Stable Food
As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.
Sales Growth
A company’s long-term performance is an indicator of its overall quality. Any business can put up a good quarter or two, but the best consistently grow over the long haul.
With $1.41 billion in revenue over the past 12 months, Simply Good Foods is a small consumer staples company, which sometimes brings disadvantages compared to larger competitors benefiting from economies of scale and negotiating leverage with retailers. On the bright side, it can grow faster because it has a longer list of untapped store chains to sell into.
As you can see below, Simply Good Foods grew its sales at a decent 8% compounded annual growth rate over the last three years as consumers bought more of its products.
This quarter, Simply Good Foods reported year-on-year revenue growth of 15.2%, and its $359.7 million of revenue exceeded Wall Street’s estimates by 1.6%.
Looking ahead, sell-side analysts expect revenue to grow 6.1% over the next 12 months, a slight deceleration versus the last three years. Still, this projection is above the sector average and suggests the market is forecasting some success for its newer products.
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Cash Is King
Although earnings are undoubtedly valuable for assessing company performance, we believe cash is king because you can’t use accounting profits to pay the bills.
Simply Good Foods has shown terrific cash profitability, driven by its lucrative business model that enables it to reinvest, return capital to investors, and stay ahead of the competition. The company’s free cash flow margin was among the best in the consumer staples sector, averaging 14.2% over the last two years.
Taking a step back, we can see that Simply Good Foods’s margin dropped by 3.1 percentage points over the last year. If its declines continue, it could signal increasing investment needs and capital intensity.
Simply Good Foods’s free cash flow clocked in at $30.75 million in Q1, equivalent to a 8.6% margin. The company’s cash profitability regressed as it was 6.2 percentage points lower than in the same quarter last year, suggesting its historical struggles have dragged on.
Key Takeaways from Simply Good Foods’s Q1 Results
We were impressed by how significantly Simply Good Foods blew past analysts’ EBITDA expectations this quarter. We were also glad its gross margin outperformed Wall Street’s estimates. Zooming out, we think this was a solid quarter. The stock traded up 3% to $34.21 immediately after reporting.
