Shares of The Simply Good Foods Company (NASDAQ:SMPL) a consumer goods company that makes branded nutrition bars and ready-to-drink shakes for folks following the Atkins diet and other diet plans, dropped sharply in Thursday-morning trading. Down 10% initially, Simply Good Foods shares are still looking pretty bad at the 10:50 a.m. EST mark -- down 5.2%.
You can blame earnings for that.
Simply Good Foods reported financial results for its fiscal first quarter of 2020 this morning. Sales grew an impressive 26% year over year to $152.2 million, but missed analyst expectations for $161.8 million. Gross profit margins on those sales slipped 2 full percentage points to 40.9%.
Worst of all, though, was that operating costs surged in the quarter. Including a one-time charge for "loss in fair value change of contingent consideration," costs more than doubled to $65.2 million, wiping out all the company's gross profit and pushing Simply Good Foods into an operating loss -- and a net loss of $0.05 per share. Wall Street had predicted a profit, and investors are understandably upset.
Will Simply Good Foods shareholders see better news soon? That depends on what you're looking for.
Although management adopted a bright outlook for the rest of fiscal 2020, noting that Simply Good is making "progress ... against [its] strategic initiatives" and has "good marketplace momentum across the business," the company's forecast for full-year sales of between $850 million and $870 million lags consensus analyst estimates for sales of $873.3 million.
On the plus side, though, management is forecasting "adjusted diluted earnings per share" (i.e., pro forma earnings) of between $0.90 and $0.95 this year. Given that Wall Street is looking for only $0.75 in fiscal 2020, Simply Good's full-year results could still end up being better than the first quarter is suggesting.