Simply Good Foods Q2 Earnings Call Highlights

09 Apr 2026, 09:04 by Amy Steele · The Cerbat Gem

Simply Good Foods (NASDAQ:SMPL) reported second-quarter fiscal 2026 results that management said fell well short of expectations, driven by weaker-than-anticipated consumption trends and execution issues across its brand portfolio. President and CEO Joe Scalzo, who rejoined the company about 12 weeks ago, said the company is “not pleased with our performance” and is taking “immediate and fundamental actions to turn around both our financial and in-market performance.”

Second-quarter results reflected slowing retail takeaway and margin pressure

Chief Financial Officer Chris Bealer said retail takeaway “slowed significantly compared to Q1,” declining 6.4% year-over-year, with the slowdown most pronounced in the second half of the quarter during the New Year, New You promotional window.

Net sales were $326 million, down 9.4% year-over-year, which Bealer attributed mainly to weaker consumption. Adjusted EBITDA totaled $55.5 million, down 18.4% from the prior year.

Gross profit was $103 million, down 20.8%, and gross margin declined 460 basis points to 31.6%. Bealer cited “inflationary costs, most notably cocoa, whey, and tariffs,” along with “some one-time effects from actions taken to mitigate OWYN product quality issues.” Excluding $3.9 million of one-time OWYN integration expenses in the current year and a $0.4 million non-cash inventory purchase accounting step-up adjustment expense in the prior year period, gross margin was 32.8%, down 350 basis points.

On a GAAP basis, the company posted an operating loss of $213.3 million versus operating income of $54.7 million last year, driven by a “non-cash loss on impairment of $249 million related to the OWYN and Atkins brand assets,” according to Bealer. Net loss was $159.7 million compared with net income of $36.7 million in the prior year.

Brand performance: Quest grew modestly; OWYN and Atkins declined

Bealer said Quest consumption increased 2.4%, but bars were pressured by “softer baseline velocities.” He noted Quest’s salty snack consumption grew 14% in the quarter, though that represented a deceleration from the first quarter.

OWYN consumption declined 2.4% versus management expectations, which Bealer tied to lapping a heavy promotional period in the prior year and “poor base velocities, including our newly expanded distribution.” He said the performance “will result in lost distribution in the coming months.”

Atkins consumption fell 23.4%, which Bealer said was driven by “known distribution losses and related trade inventory reductions,” roughly in line with expectations.

In his remarks, Scalzo emphasized that Quest is the company’s “billion-dollar retail brand” and “primary driver of our long-term growth,” but said the company has seen “a slowdown in buy rate” for Quest, especially in bars. He said re-accelerating Quest’s bar business will be “one of our highest priorities,” with a focus on stronger core velocities, a consumer-aligned innovation pipeline, and more competitive marketing and communications.

For Atkins, Scalzo said the company expects the brand “will continue to decline in the near term,” largely due to anticipated retail distribution losses as shelf sets evolve. He said the company is focused on “resetting the retail baseline of the business to a viable core assortment,” while taking a “thoughtful, fact-based approach” to repositioning and future investment decisions, including assessing opportunities related to GLP-1 use for weight management.

On OWYN, Scalzo acknowledged the company “did not meet our own expectations with the integration of the brand,” citing lost brand expertise and poor marketplace execution. He also described a product quality issue in OWYN’s Pro Elite 32-gram shake that affected “taste, texture, and consumer acceptance” during a major distribution expansion. Scalzo said the quality issue has been addressed, but performance fell short and the company expects “some near-term distribution losses over the next year.”

Cost inflation and productivity: cocoa benefits offset by whey headwinds

During Q&A, Bealer said cocoa expectations have not materially changed since the prior call and the company still expects cocoa savings to begin flowing through in the fourth quarter. However, he said whey costs “have gone up significantly,” partially offsetting expected cocoa relief.

Scalzo added that whey inputs are “at historic highs” and said the company expects “a fair amount of pressure on our protein structure” into the second half of fiscal 2026 and into fiscal 2027, while noting uncertainty around how long the market stays elevated.

Bealer also said the company has a “pretty aggressive productivity program” that has been ramping throughout the year and “gets into full swing by Q4,” though lower volumes are expected to reduce some productivity benefits due to inventory flow-through.

Restructuring initiative targets fixed-cost reductions and improved P&L shape

Bealer said the company has launched a “major initiative to reduce total fixed costs,” including restructuring staffing levels, increasing functional excellence in key areas, realigning the use of external agencies and brokers, and improving manufacturing and logistics efficiency. The company expects total one-time costs of about $15 million, including costs already incurred in the CEO transition.

Scalzo framed the effort as part of restoring a healthier economic model. He said the company’s ability to recruit consumers depends on having the right P&L structure, noting the business historically targeted “gross margins approaching 40%, with sustained marketing investment around 10% of sales and adjusted EBITDA margins approaching 20%.” He said the company’s financial structure has moved away from that, with gross margins in the “mid-30s%,” reduced marketing spend as a percentage of sales, and G&A dollars growing faster than the underlying business.

Among the company’s turnaround beliefs, Scalzo cited:

“Relentlessly” attacking supply chain inefficiency and lowering total delivered cost
Using pricing actions as needed to offset cost inflation over time
Reducing reliance on price promotion, which he said has poor return and sends a poor message to consumers
Lowering fixed overhead while improving key functional expertise
Restoring more consistent brand investment with ROI-driven marketing and “fewer, bigger” innovation initiatives focused on the core business

On marketing, Scalzo said investors should view 10% of sales as a ceiling “until we prove that there’s ROI justifying more.” Bealer said the company plans to hold marketing spending at planned levels for the year despite sales declines, intended to strengthen brand equities and drive consumption.

Guidance lowered; share repurchases continued

Management reduced its full-year outlook. Bealer said fiscal 2026 net sales are expected to be $1.31 billion to $1.35 billion, representing a decline of 10% to 7%, reflecting weaker consumption trends and expected distribution losses. Adjusted EBITDA is now expected to be $217 million to $225 million, down 22% to 19% year-over-year.

For the third quarter, the company expects net sales of $328 million to $339 million, down 14% to 11% year-over-year, with adjusted EBITDA of $46 million to $50 million, down 38% to 32%, as it maintains marketing investment in line with plan.

Bealer said the company ended the quarter with $107.4 million in cash and $400 million in term loan principal outstanding, with net debt to trailing 12-month adjusted EBITDA of about 1.2x. The company repurchased almost 5 million shares in the second quarter and has spent about $240 million repurchasing more than 10% of its outstanding common stock over the past 12 months. As of April 9, 2026, Simply Good Foods had about $182 million remaining under its share repurchase authorization.

In closing remarks, Scalzo said his near-term focus is on strengthening the economic model through pricing and cost reduction, improving discipline and execution through “fewer, bigger initiatives,” and rebuilding brand investment behind better consumer insights and marketing execution.

About Simply Good Foods (NASDAQ:SMPL)

Simply Good Foods Co (NASDAQ: SMPL) is a North American consumer packaged foods company specializing in better-for-you nutrition products. The company’s portfolio centers on two well-established brands, Atkins and Quest, which offer a range of low-carbohydrate, high-protein bars, powders, shakes, and snacks. Simply Good Foods aims to support consumers’ health and wellness goals by delivering convenient, nutrient-dense options without added sugars or artificial sweeteners.

Under the Atkins brand, the company produces meal replacements, snack bars, and ready-to-drink shakes designed for low-carb dieters.