Calavo Growers (CVGW) Misses Q1 EPS by 8c, Revenues Miss

Calavo Growers (NASDAQ: CVGW) reported Q1 EPS of $0.40, $0.08 worse than the analyst estimate of $0.48. Revenue for the quarter came in at $281.2 million versus the consensus estimate of $313.23 million.

Second Quarter Highlights

Total revenue of $281.2 million, essentially flat with fiscal second quarter 2019 despite a profound impact on volume from COVID-19.
Gross profit of $22.1 million compared to $36.8 million last year.
Net loss of $3.3 million and adjusted net income of $7.0 million.
Diluted loss per share of $(0.19) and adjusted diluted earnings per share of $0.40.
Completed the acquisition of Simply Fresh Fruit (“SFFI”), a high-quality producer of fresh-cut fruit.
James Gibson, formerly President of Renaissance Food Group, was promoted to Chief Executive Officer, and Joel Silva, formerly Division Controller for Fresh and Foods segments, was promoted to Corporate Controller and Chief Accounting Officer. Subsequent to the quarter end, Kevin Manion joined Calavo as Chief Financial Officer.
Additionally, J. Link Leavens, who previously served as Vice Chairman of the Board, was appointed Chairman. This appointment completes the separation of Board Chairman role and CEO role.
Minimized supply chain disruptions and ensured business continuity with swift response to COVID-19.

Management Commentary “We have been operating under extraordinary circumstances in the COVID-19 environment and I want to thank our employees for their steadfast commitment to serving our customers and operating at the highest standards every day,” said James E. Gibson, CEO of Calavo Growers. “Our sales were significantly impacted beginning in March by the closure of large restaurant chains, retail food outlets and the consumer shift to non-perishable foods at the onset of shelter in place restrictions. However, demand in our retail grocery and foodservice channels began to improve in April with further progress through May.”

Gibson continued, “Our Fresh segment was especially resilient during the quarter, with sales increasing 13.0% over last year, and gross profit per carton of avocados improving sequentially from Q1. As the economy gradually reopens, we expect demand to pick up across our Fresh, RFG and Foods segments, and our bottom line to return to pre-COVID-19 levels.”

“While we still have limited visibility into the duration and severity of COVID-19, we remain confident in our long-term growth prospects,” Gibson continued. “Throughout our 100-year history, Calavo has demonstrated leadership in the avocado and fresh food sectors regardless of shocks to the economy. Global demand for fresh avocados continues to grow rapidly and we are confident that our RFG and Foods segments are positioned to benefit from rising demand for fresh and prepared food categories. We have all the resources in place to capitalize on this tremendous market opportunity – an experienced leadership team, a robust operating platform, established relationships with blue-chip retailers and foodservice customers, and a strong balance sheet. We will continue to navigate through the pandemic while keeping our focus on delivering profitable growth and returns to our shareholders over the long term.”

2020 Outlook

Given the evolving and uncertain impact of the COVID-19 pandemic, the Company is withdrawing its prior fiscal 2020 guidance. Gibson commented, “Calavo serves a blue-chip customer base comprised of many of the largest and most stable retailers, mass merchandisers and foodservice providers in the US, which positions us well to continue to deliver profitable growth once economic conditions normalize. To that end we remain cautiously optimistic as we start to see retail volumes beginning to strengthen and orders from foodservice customers rebounding off crisis-lows. As we look ahead into the third quarter of fiscal 2020, we expect adjusted EBITDA to improve sequentially from a combination of higher sales volumes and lower input costs due to seasonality.”

For earnings history and earnings-related data on Calavo Growers (CVGW) click here.

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