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How B&G Foods Performed in the Second Quarter of 2015

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Oct. 21 2015, Updated 7:06 p.m. ET

2Q15 performance recap

B&G Foods’s (BGS) 2Q15 net sales fell by 4.6% to $193.6 million from $202.9 million in 2Q14. Almost two-thirds of the decrease in net sales was attributable to Rickland Orchards. The acquisition of Rickland Orchards did not work out well, and management considers this one of B&G Foods’s failed acquisitions. Net sales of the Rickland Orchards brand decreased $6.1 million from 2Q14. This weakness led to continued impairment of the Rickland Orchards brand.

Speciality Brands, which B&G Foods acquired in 2014, showed strong sales in 2Q15, offsetting the Rickland Orchards decline. It positively impacted the company’s net sales by $1 million. Gross profit for 2Q15 decreased by $1 million, or 1.6%, to $62 million from $63 million in 2Q14.

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The company’s gross margin increased by 0.9% to 32% compared to 2Q14. The product price increase and lower delivery costs mainly contributed to the gross margin increase. Selling, general, and administrative expenses decreased by $6.1 million, or 24.1%, to $19.2 million from $25.3 million in 2Q14. This decrease was mainly due to a drop in acquisition-related expenses as well as consumer marketing and selling expenses. B&G Foods recorded net income of $18.7 million under GAAP (generally accepted accounting principles), or $0.33 per diluted share, for the second quarter of 2015.

Key performance movers in the first half of 2015

Net sales for the first two quarters of 2015 increased by $9.7 million, or 2.4%, to $410.8 million from $401 million for the first two quarters of 2014. Net sales of Specialty Brands contributed $23.1 million to the overall increase. The Rickland Orchards brand, which experienced a drop in net sales of $13.7 million compared to the first two quarters of 2014, negatively affected the company’s total net sales.

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Gross profit for the first two quarters of 2015 increased by $1.7 million, or 1.3%, to $129.4 million from $127.7 million for the first two quarters of 2014. B&G Foods’s gross margin decreased to 31.5% in the first two quarters of 2015 from 31.8% in the first two quarters of 2014. The decrease was attributable primarily to customer refunds in the first two quarters of 2015 related to the Ortega and Las Palmas recalls and the negative impact of the Canadian exchange rate. The company reported net income under GAAP of $38.3 million, or $0.69 per diluted share, for the first two quarters of 2015.

Peers’ performance

B&G Foods’s competitors in the industry include The J.M. Smucker Company (SJM), General Mills (GIS), and Bunge (BG). They reported net margins of 7.0%, 10.1%, and 0.8%, respectively, for their last reported quarter. The Guggenheim S&P Equal Weight Consumer Staples ETF (RHS) invests 2.8% of its portfolio in SJM. The Fidelity MSCI Consumer Staples Index ETF (FSTA) invests 1.8% of its portfolio in GIS.

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