Lawrence Kurzius – President and CEO
Saw a slowdown then an uptick
“As has been widely recognized by food analysts and investors, U.S. consumer purchases for center-of-store food were soft in the first quarter, especially in February. This is based on retail consumption reports for the period which showed a measurable year-on-year deceleration across many categories.
While retail sales growth of spices and seasonings exceeded the performance of most center-of-store categories, continuing to display its relative strength, our category was impacted by the industry slowdown as well. We believe that this short-term slowdown can be attributed to a confluence of factors, including unseasonable weather, a late Easter and the timing of income tax refund payments, which are likely temporary.
In fact, a few weeks into our second quarter we have seen an uptick in our sales of U.S. consumer products. Our outlook for U.S. sales of spices and seasonings for the balance of the year remains strong and unchanged from our prior projections.”
Believe that transitory issues affected us
“What we didn’t anticipate was the slower industry sales in the U.S., which as we’ve discussed on the call we think are really due to transitory factors. We don’t see anything in our data going into March. I know we’re getting into second quarter here, but we don’t see anything in our data going into March to suggest the slowness that we saw in January and February as continuing. And for the reasons that we gave on the call, we think that it is transitory and the timing of tax payments. I think Lent had a big impact on us. Our business has a very high index to Hispanic consumers who are more catholic. The later Easter made all of Lent fall outside of the quarter and we’re certainly seeing the reversal of that in March. And then the weather that was out of sync with the season where it was just very warm and that discourages consumption of the cold weather items that normally we sell a lot of during that time of year, chili, gravy and all of the things that go along with that.”
Loss of shelf space at one retailer is big impact
“That is really the story in the UK, Evan, is that one retailer – it’s a very concentrated market, so the customers are larger and they all matter and has a big impact not just on our UK business but it’s big enough that it impacts our EMEA business as a whole. The change in shelf space and items in distribution with that retailer really occurred during the fourth quarter of last year. And so that’s an unfavorable comparison that we’re going to carry for that region for the whole year. I will also say that that’s really baked into our thinking that 5% to 7% constant currency. We’ve got a great story in other markets and other markets in that market. We continue to invest in marketing in the UK even with this change because it’s important to show both that customer and the other customers in the market and frankly the consumer the relevance and importance of our brands”
Change in timing of refunds has a real impact
“I don’t want to underestimate the impact that the change in U.S. income tax refund policy has had pushing those refunds later, especially for consumers at the lower end of the economic spectrum who tend to spend those refunds. Often that’s their earned income coming back to them, those go into regular household consumption and I think it has the same kind of impact as a change in SNAP payments.”