Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.
What: Private label and foodservice supplier Treehouse Foods (NYSE:THS) stock was down more than 10% early in trading on Feb. 12, before leveling off at about an 8.8% loss as of 1:15 p.m. EST:
The stock is down 13% since late January.
So what: Treehouse Foods released financial results for its fourth quarter and full year 2014 on Thursday morning, missing earnings per share by a wide margin, even after accounting for one-time acquisition-related costs.
Now what: In the company earnings release, management blamed "a sharp and unexpected reduction in inventory from a large mass merchant customer across nearly all of our categories in the final weeks of December" for its poor results in the quarter. Frankly, it's not reassuring that management didn't know or anticipate this earlier, and one can't help but wonder if this unexpected reduction from a large customer could become permanent. Frankly, Treehouse's private-label business is highly competitive, and the uncertainty around losing business on a more permanent basis is there.
The company is guiding for 23%-24% sales growth in 2015 while pointing out that earnings will feel the impact of the strength of the U.S. dollar on foreign exchange rates. Treehouse continues to grow its business, but investors should take the time to make sure that last quarter's shortfall isn't a sign that Treehouse is having trouble retaining major customers for its private-label business.