The Marzetti Company — Fiscal Year 2026 Earnings Summary

Financial Performance

• Consolidated fourth quarter net sales were $465.0 million, a 2.2% decrease year-over-year; excluding $12.2 million in non-core TSA sales from the prior year, adjusted sales increased 0.4%.
• Fiscal year 2026 consolidated net sales were $1.93 billion, a 1.1% increase from $1.91 billion in fiscal 2025.
• Fourth quarter consolidated gross profit reached a record $114.0 million, up $7.9 million year-over-year, with gross margin improving 220 basis points to 24.5%.
• Fiscal year 2026 consolidated gross profit was $477.3 million, with an adjusted gross margin of 25.0% compared to 24.0% in the prior year.
• Fourth quarter SG&A expenses increased $12.3 million to $74.3 million, driven by $10.5 million in acquisition-related costs and $1.6 million in incremental amortization for Bachan's intangible assets.
• Fiscal year 2026 SG&A expenses included $11.3 million in acquisition-related costs and $1.2 million in amortization expense.
• Fourth quarter consolidated operating income grew $18.8 million to $57.7 million, benefiting from an $18.5 million gain on the sale of the Milpitas, California property.
• Fiscal year 2026 operating income increased to $238.7 million from $220.3 million, including a $16.6 million net benefit from the Milpitas property sale.
• Fourth quarter net income was $48.3 million ($1.76 per diluted share), compared to $32.5 million ($1.18 per diluted share) in the prior year.
• Fiscal year 2026 net income totaled $191.6 million ($6.98 per diluted share), up from $167.3 million ($6.07 per diluted share) in fiscal 2025.
• Adjusted diluted EPS for the fourth quarter was $1.46, a 9.0% increase from $1.34 in the prior year.
• Adjusted diluted EPS for fiscal 2026 was $6.83, up from $6.72 in fiscal 2025.
• Fiscal 2026 cash flow from operating activities increased $22.3 million to a record $283.8 million.
• Interest expense for the fourth quarter was $1.8 million, compared to zero in the prior year, due to a $200 million term loan used to finance the Bachan's acquisition.
• Fiscal 2026 total cash dividends paid were $108.8 million, and the company repurchased $36.3 million of common stock.

Guidance and Future Outlook

• Fiscal 2027 Retail segment sales are expected to benefit from the Bachan's acquisition and new product launches for legacy brands and the licensing program.
• Fiscal 2027 Foodservice segment sales are expected to be supported by select quick-service restaurant customers and national chain accounts.
• Management anticipates a moderate level of inflation in fiscal 2027, which will be offset through inflationary pricing and cost savings programs.
• External factors including U.S. economic performance, consumer behavior, and the Cyclospora outbreak may impact topline growth in the coming year.

Business Segments and Product Lines

• Retail segment fourth quarter net sales increased 0.9% to $243.6 million, including $15.4 million in incremental sales from the Bachan's acquisition.
• Retail segment sales volume (pounds shipped) declined 1.7% in the fourth quarter, though Bachan's accounted for 520 basis points of volume growth.
• Foodservice segment fourth quarter net sales decreased 5.3% to $221.4 million; excluding non-core TSA sales, adjusted sales decreased 0.1%.
• Foodservice segment sales volume (pounds shipped) declined 4.1% in the fourth quarter, while core sales volume improved 0.1%.
• The Bachan's acquisition closed on May 1, 2026, adding a Japanese Barbecue Sauce brand known for clean-label products.
• Circana retail scanner data for the quarter ended June showed Bachan's sales up 8.7% and total distribution points up 16.6%.
• Texas Roadhouse dinner rolls sales were up 28.1% for the quarter and 76.3% for the fiscal year.
• Retail net sales growth was unfavorably impacted by the lapping of Chick-fil-A sauce pipeline fills, reduced Sister Schubert's rolls sales in the club channel, and the prior year's rollout of Texas Roadhouse rolls into traditional grocery chains.

Market and Competitive Landscape

• The company monitors the impact of the Cyclospora outbreak on product demand and sales.
• Retail scanner data indicates continued strong performance for the Bachan's brand as it grows share in the barbecue sauce category.
• The company faces competition from store brands impacting branded retail volumes.

Risks and Challenges

• Risks include the ability to successfully integrate the Bachan's business and achieve operational and financial objectives.
• Potential disruptions from epidemics, pandemics, or foodborne outbreaks (e.g., Cyclospora) affecting demand, supply chains, and operations.
• Inflationary pressures on input costs, freight, energy, and packaging, and the risk of customer reaction to pricing actions.
• Dependence on key personnel, labor supply, and labor relations stability.
• Risks related to geopolitical events, trade policies, tariffs, and adverse changes in customer relationships.
• Potential for product recalls, cyber-security incidents, and capacity constraints.
• Risks associated with the success of new product development and market acceptance.

Management Commentary and Tone

• CEO David A. Ciesinski expressed pleasure with record gross profit and strong gross margin improvement in the fiscal fourth quarter.
• Management highlighted the strong performance of the Bachan's brand and the continued strength of Texas Roadhouse rolls.
• The tone regarding fiscal 2027 is focused on growth from acquisitions and new products, while acknowledging external economic and health-related uncertainties.

Other Key Points

• The company increased its regular cash dividend for the 63rd consecutive year in fiscal 2026, with the quarterly dividend paid on December 31, 2025.
• A $18.5 million gain was recognized on the sale of the former sauce and dressing facility in Milpitas, California, which was closed in fiscal 2026.
• Fiscal 2025 results included a $10.8 million noncash settlement charge for the termination of legacy pension plans.
• The Bachan's acquisition was financed in part with a $200 million term loan, resulting in interest expense for the current year.
• Adjusted financial measures exclude non-core TSA sales, acquisition-related SG&A costs, and amortization of intangible assets to facilitate year-over-year comparisons.