Double-digit sales growth in the first quarter for Del Monte Foods Company
Unfortunately for Del Monte, the top-line performance didn't trickle down to earnings. Pricing increases and volume growth couldn't keep up with a raging increase in commodity prices and cost of goods sold increased by a whopping 23.8%. Operating expenses and market expenses related to Pet Products further strained margins and the end result was a $10.1 million loss, versus last year's $3.5 million profit.
Del Monte's balance sheet doesn't paint a strong picture. Cash has dropped to $8.6 million (66% less than the end of last year's stash of cash) while long-term debt remains above $1.8 billion. The company is still in flux as it grows through acquisitions including Meow Mix and Kraft's
Mid-range foodies such as Del Monte and Smithfield Foods
Long term, Del Monte just doesn't look to have its act together. The company opened its shiny new Pittsburgh Del Monte Center in 2006. Two years later, the company decided to move more than 100 marketing jobs from this new Pittsburgh center to its San Francisco headquarters. As a potential investor, I have to wonder whether "centralizing" operations is worth the move to higher-cost California, especially with the large amount of debt that Del Monte is carrying. Del Monte should step back and really think about what its strategic goals are, especially in light of an inflationary economic environment.
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