TreeHouse Foods To Optimize Business With Restructuring Plans
Zacks Investment Research | Feb 26, 2020 08:25PM ET
TreeHouse Foods, Inc. (NYSE:THS) unveiled a host of organizational changes to optimize the business and better serve customers. The company, which currently operates under Baked Goods, Beverages and Meal Solutions segments, will reorganize itself into two segments namely, Snacking & Beverages, and Meal Preparation.
It is currently organized on the basis of product category, while its planned restructuring is on the basis of market dynamics. The reorganization will be effective from the first quarter of 2020. The move seems appropriate amid the competitive retail grocery scenario, as it will help TreeHouse Foods’ customers to encourage more innovations in line with consumer needs and in turn be more relevant.
Reorganization in Detail
The Snacking & Beverages segment will include categories with increased market growth potential. These particularly include Bars, Broth, Powdered & Liquid Beverages, Griddle, Candy, Cookies & Crackers, Tea, Pita, Pretzels, and Other Blends. The segment will be focused on driving revenues, and undertaking research, development and commercialization per the changing consumer trends. Notably, the Snacking & Beverages division generated revenues of $1.7 billion in 2019.
The Meal Preparation unit will consist of categories — including Bouillion, Cheese & Pudding, Pickles, Pourable & Spoonable Dressings, Hot Cereal, Preserves, Red Sauces, Refrigerated Dough, Non-Dairy Creamer, Pasta & Dry Dinners, Sauces, Single Serve Coffee, and Syrup. The segment will be concentrated on enhancing productivity, efficiency and cash flow. In 2019, the unit produced revenues of $2.6 billion.
Can Efforts Bring a Turnaround?
The reorganizations will likely help TreeHouse Foods to efficiently allocate resources per the evolving retail landscape. Let’s see if these efforts can help the company see a turnaround in its sales.
Notably, the Zacks Rank #5 (Strong Sell) company has been witnessing year-over-year sales declines for eleven straight quarters now. In fact, it has been struggling with sluggish Baked Goods and Meal Solutions units for the past few quarters. Sales at the Baked Goods segment fell 4.4% year over year in the fourth quarter of 2019, whereas net sales at the Meals Solutions unit declined 3.5%. Sales at both segments were hurt by adverse volume/mix. Apart from this, the Baked Goods segment’s sales were hurt by SKU rationalization efforts and the Meals Solutions unit bore the brunt of currency headwinds.
On its last earnings call, management had expected net sales decline of 3-5% for the first half of 2020. For the first quarter of 2020, net sales are expected to be $0.98-$1.02 billion, whereas it delivered $1,301.1 million (nearly $1.30 billion) in the first quarter of 2019.
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Such downsides have caused the company’s shares to dip 20.4% in the past three months, wider than the Zacks Investment Research
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