Remember the 1978 cult classic: "Attack of the Killer Tomatoes"?You know, the movie that left America awash in the raw ingredients for a fabulous marinara sauce? Well, consider this column the long-awaited sequel: "Fad Diets II: The Carbs Strike Back." Or perhaps "Revenge of the Pasta."
Over the past week, shareholders of the tiny Californian pasta maker Monterey Gourmet Foods (NASDAQ:PSTA) feasted on a pair of happy news entrees. First off, their company broke even for the quarter, reversing its year-ago loss. Second, Monterey's mortal enemy, the Atkins Nutritionals company, filed for bankruptcy, citing waning demand for its low-carb products.
While the waning of the Atkins diet fad might be considered cause for lamentation among the gravity-challenged, it's unqualified good news for Monterey. And if I may say so, just desserts as well. Only a year or so ago, the anti-carbohydrate diet made popular by Dr. Atkins' company helped to drive one of Monterey's peers, New World Pasta, into bankruptcy.
New World wasn't the only victim of the late Dr. Atkins. There was also Twinkie king Interstate Bakeries, and Motley Fool Stock Advisor pick KrispyKreme Doughnuts (NYSE:KKD) suffered a near-death experience of its own at the hands of the low-carb lifestyle.
But we were talking about Monterey. Unlike those unlucky companies named above, Monterey seems to have survived the days of the low-carb craze more or less unscathed. And now it's time to emerge back into growth and, perhaps, even profitability. In its earnings report released last Thursday, Monterey announced a whopping 41% increase in second-quarter sales against Q2 2004. Although from a per-share perspective the company just broke even, on a firm-wide basis the company actually recorded a tiny $11,000 profit -- a considerable improvement over the year-ago quarter's $543,000 loss.
With margins still slim despite the resurgence of sales, the company certainly isn't out of the woods yet. And this microcap pasta maker still has to contend with competition from the larger (but still small cap) American Italian Pasta (NYSE:PLB) and tiny nano-cap Armanino Foods (NASDAQ:ARMF). That said, today is not a day to dwell on the difficulties that lie ahead, but rather a day for Monterey's shareholders to relish the Schadenfreude of Atkins Nutritionals' demise.
Fool contributor Rich Smith does not own shares of any company named above.
