The Marzetti Company is no longer the old Lancaster Colony holding company. It is a two-channel specialty foods operator that just closed the largest purchase in its history and still leans on a single restaurant brand for nearly a third of sales. The May close of the $400 million Bachan's deal is the growth answer management is selling. The market is not paying the old specialty-foods multiple for that story. Shares sit near the low end of the past year's range after a year in which reported sales barely grew and core retail volume went the wrong way.
The fiscal-year print showed how the machine actually works. Consolidated sales reached $1.93 billion. That is barely higher than the prior year. Gross profit still set another record because the network reset from closing Milpitas and loading Horse Cave and College Park is doing what it was built to do. Adjusted earnings barely moved. Reported earnings jumped because the California land sale dropped an $18.5 million gain into the fourth quarter. Foodservice operating profit rose even as the Winland temporary supply agreement rolled off. Retail operating profit did not. One restaurant chain, Chick-fil-A, now accounts for 30% of sales when licensed grocery and kitchen supply are added together.
The next year is supposed to look better on the top line because Bachan's is in for a full year and new items are already selling in. Management also flagged a produce-linked Cyclospora scare as a first-quarter sales headwind of about 250 basis points. Operating income is framed as down hard in that opening quarter before the year is meant to recover. The investment debate is whether Bachan's plus another hundred basis points of gross margin can offset a dressing aisle that is still shrinking and a customer book that is more concentrated than the specialty-foods peer set usually tolerates.