HANOVER, PA. — Retail sales continued to roll at Utz Brands, Inc. in the first quarter of fiscal 2022 as organic net sales surged nearly 21% behind the company’s Utz and On The Border brands. Higher costs, though, remained an issue for the salty snacks maker as it posted its third straight quarterly loss.
Utz Brands sustained a loss of $31.9 million in the first quarter ended April 3, which compared with a loss of $23.3 million in the same period a year ago. The most recent quarter included a $23 million buyout of multiple third-party direct-store delivery rights in the quarter. Adjusted EBITDA, meanwhile, totaled $36.5 million in the quarter, down 3.7% from $37.9 million a year ago.
Net sales increased 27% to $340.8 million from $269.2 million.
“Consumer demand for our advantaged portfolio of snacking brands remains robust, and price elasticity is better than we anticipated,” Dylan B. Lissette, chief executive officer, said during a May 12 conference call with analysts. “We are fortunate to participate in a resilient and stable salty snacks category that has proven throughout our history to perform well during both inflationary and recessionary times.”
Mr. Lissette said Utz continues to have large white space opportunities for growth, noting the company is under-distributed across the United States relative to its competitors.
“We are continuing to make the right long-term investment decisions to drive continued above-market growth in our expansion and emerging geographies.”
One of those decisions included the late-April acquisition of a 125,000-square-foot snack food manufacturing plant in Kings Mountain, NC, from Evans Food Group Ltd., which does business as Benestar Brands, for $38.4 million.
“The facility will enable us to in-source manufacturing across several product types that we currently outsource to some degree, increase our operational flexibility and will contribute to higher long-term margins over time based on identifiable, multifaceted cost synergies,” Mr. Lissette said. “We plan to begin production at Kings Mountain in the second half of this year, and the facility will play a key role in supporting the strong growth of our brands across our rapidly growing markets in the Southeast, the Northeast and the Mid-South.”
Mr. Lissette said retail sales of the company’s “power brands,” which include Utz, On The Border, Good Health, Boulder Canyon, Zapp’s, Hawaiian, TGIF and others, increased 20% during the quarter, with Utz and On The Border increasing 22% and 35%, respectively.
“We drove share gains in our top three sales subcategories of potato chips, tortilla chips and pretzels, representing approximately 73% of sales,” he said. “I will note that both our pork rinds and cheese snacks performance was primarily impacted by supply chain challenges, and our team is actively working to address these opportunities to unlock their full potential.
“Potato chip and pretzel growth were both led by our Utz brand with potato chip growth of nearly two times the category growth, and tortilla chip growth was led by our On The Border brand with sales growing nearly three times the category growth.”
As a result of its strong top-line trends, Utz raised its net sales growth expectations for the full year to 10% to 13%, up from 7% to 10%. Organic net sales growth is now forecast at 8% to 10%, up from 4% to 6%.