Calavo Growers focuses on growth and streamlining operations
2023-07-30
Calavo held a call meeting to discuss the company's sequential cash flow and earnings improvement, providing an update on its financial performance and expressing gratitude for the support of Calavo. The meeting focused on the company's strategy to streamline operations and invest in growth areas.
During the meeting, the CEO emphasized the importance of having talent and capabilities that are growth-oriented in order to drive the company's expansion. To achieve this, the company is reducing and streamlining operations in the U.S. and Mexico, reallocating the saved funds towards investing in skills and capabilities in growth areas. These growth areas include international markets, guac, prepared fresh cut, and channel development with club and national retailers. By focusing resources on these areas with the greatest potential for growth, the company aims to be efficient and effective.
The key drivers of the business discussed in the meeting were the volatility in gross margin, capital expenditure projects, dividend payout, and changes in the growing business, particularly in terms of sourcing and demand. The company outlined several plans for their product/service, including addressing the decrease in volume and higher pricing, analyzing demand elasticities and consumer behavior, and identifying growth opportunities in the deli aisle. They also anticipate inflation moderation to improve performance and plan for long-term growth in prepared categories. Additionally, the company is considering restructuring decisions, consolidating distribution centers in the avocado business, and exiting a noncore salsa business.
Looking ahead, the company provided its outlook for the remainder of the year. In the Grown Segment, per case margins are expected to be at or near the low end of the $3 to $4 range due to ongoing margin volatility. However, volume is expected to increase and be approximately commensurate with changes in supply. In the Prepared Segment - Fresh Cut Division, gross margins will be at or near the low end of the 10% to 12% range due to softer volume in the near term. However, new customer distribution points are scheduled to launch in the second half of the year. In the Prepared Segment - Guacamole Division, gross margins are expected to double from the prior year and approximate 20%, attributed to lower fruit costs and yield improvements. The company also announced its restructuring plans and exit from the salsa business.
The participants of the call included key executives and analysts. Julie Kegley, Investor Relations, provided an overview of the meeting outcome. Brian Kocher, President and CEO, acknowledged the company's performance challenges in the first quarter and emphasized the need for earnings growth and unit volume growth across their platforms. Shawn Munsell, CFO, discussed the company's financial performance and strategies for growth. Analysts Ben Bienvenu, Mitch Pinheiro, Ben Klieve, and Eric Larson also participated in the meeting, providing insights and asking questions.
Despite the short-term challenges, the company remains optimistic about its long-term prospects. With a focus on improving efficiency, reducing costs, and optimizing various aspects of their operations, Calavo is determined to drive growth and profitability. By investing in growth areas and adapting to changing customer needs and market dynamics, the company aims to position itself for success in the future.