B&G Foods narrows 2025 guidance to $1.82B-$1.84B while advancing portfolio divestitures

Earnings Call Insights: B&G Foods (BGS) Q3 2025

MANAGEMENT VIEW

* CEO Kenneth Keller highlighted significant improvement in adjusted EBITDA delivery for the third quarter, with sequential improvement in base business net sales trends. Keller stated, "Q3 net sales of $439.3 million finished minus 4.7% versus last year, although base business net sales, which excludes the impact of divestitures were down minus 2.7%. Third quarter adjusted EBITDA was $70.4 million, flat versus last year on a reported basis, but up year-over-year, excluding the impact of divestitures."
* Keller outlined the impact of portfolio divestitures, noting the removal of Don Pepino and Sclafani in May and Le Sieur U.S. canned peas in August, which together removed approximately $10.3 million of net sales and $3.2 million in adjusted EBITDA from Q3. Keller also announced, "Last week, we announced the divestiture of our Canadian Green Giant business in canned and frozen vegetables. That divestiture is subject to Canadian regulatory approval and is expected to close late in the fourth quarter or during Q1 fiscal year '26."
* Keller emphasized ongoing strategic focus: "These Green Giant divestitures, along with the recently completed Don Pepino, Sclafani and Le Sieur divestitures will create a more highly focused B&G Foods, which we believe will lead to adjusted EBITDA as a percentage of net sales approaching 20%, increased cash flow generation, a lower leverage ratio closer to 5x, a more efficient cost structure and clear synergies within our portfolio."
* CFO Bruce Wacha stated, "I am pleased to report that despite a challenging consumer backdrop, we had a reasonably strong third quarter, driven by a mix of continued strength in some channels such as club and foodservice as well as the validation of our cost savings initiatives."

OUTLOOK

* The company revised and narrowed its fiscal year 2025 guidance to $1.82 billion to $1.84 billion in net sales and $273 million to $280 million in adjusted EBITDA, reflecting the impact of recent divestitures and current base business trends. Keller stated, "We expect the fourth quarter to show continued improvement versus the first half fiscal year '25 trend. Flat net sales, excluding the divestitures with year-over-year growth in adjusted EBITDA."
* Management expects the 53rd week to add 2% to 3% sales growth in Q4, partially offsetting base business net sales projected to be down approximately 2% to 3% in Q4, consistent with the trend in Q3.
* Wacha confirmed, "Our guidance continues to account for a modestly soft economic environment that has persistently impacted consumer spending patterns. It reflects our expectation that our top line will continue to stabilize, combined with the benefit of the 53rd week, that modest pricing around tariffs will offset the majority of these costs and that material input costs will remain relatively consistent."

FINANCIAL RESULTS

* B&G Foods reported $439.3 million in net sales for Q3 2025, $70.4 million in adjusted EBITDA, 16% adjusted EBITDA as a percentage of net sales, and $0.15 in adjusted diluted earnings per share.
* Gross profit for the third quarter was $99 million or 22.5% of net sales. Adjusted gross profit was $98.8 million or 22.5% of net sales.
* Net interest expense decreased by $4.9 million to $37.3 million for the third quarter, attributed to lower net debt, benefits of lower interest rates on variable rate debt, and a net gain on extinguishment of debt of $0.7 million.
* Selling, general and administrative costs decreased by $1.4 million or 3% to $44.6 million, with consumer marketing expenses down by $1.8 million.
* The divestitures negatively impacted third quarter adjusted EBITDA by approximately $3.2 million.

Q&A

* Andrew Lazar, Barclays: Asked about the lowered sales guidance and base business trends for Q4. Keller responded, "We brought the bottom end down a little bit, not much. I think all we're doing is reflecting the impact of the divestitures fully. And also, we've kind of kept the base business net sales trends consistent with what we were seeing in Q3."
* Lazar inquired about volume elasticity in the Spices & Flavorings business. Keller noted, "We've just taken it literally. So it's only been out -- we don't have really consumption data yet for it because most of that pricing hit kind of at the end of October."
* Scott Marks, Jefferies: Questioned base business performance for Q4 and trends by segment. Keller detailed, "Meals is down just a little bit, but we are starting to see some improvements in our Ortega and other trends. Our Baking Staples business has probably been a little bit weaker."
* Robert Moskow, TD Cowen: Asked about leverage targets and the impact of Green Giant divestitures. Wacha responded, "About half of that was coming from the divestiture of the various Green Giant pieces, Le Sieur Canada and then U.S. ... The rest was stabilization of EBITDA, excess cash and working capital management."
* William Reuter, BofA Securities: Asked about shelf space assumptions and certainty of Green Giant U.S. sale. Wacha stated, "We haven't done a further probability weighting by like inches of shelf space, if that's what you're asking."
* Carla Casella, JPMorgan: Inquired about working capital anomalies and inventory reimbursement. Wacha clarified, "There's another $2 million, $3 million of inventory that we bought for the Don Pepino and Sclafani brands on behalf of the new owners that they reimbursed us for in the fourth quarter."

SENTIMENT ANALYSIS

* Analysts conveyed a neutral to slightly negative tone, with repeated queries about guidance reductions, elasticity from pricing, and the progress of divestitures, as seen in questions about leverage, shelf space, and macroeconomic headwinds.
* Management maintained a neutral and measured tone in both prepared remarks and Q&A, emphasizing portfolio focus, cost savings, and the steps being taken to meet leverage and profitability targets. Keller and Wacha provided clarifications and detailed explanations but avoided making strong forward-looking assertions.
* Compared to the previous quarter, the tone from both analysts and management remained cautious but more focused on the specifics of divestitures and margin recovery, moving from broader macroeconomic concerns to the tangible impacts of portfolio actions.

QUARTER-OVER-QUARTER COMPARISON

* The company continued its portfolio reshaping, progressing from announcing and closing smaller divestitures in Q2 to the pending Green Giant Canada sale and ongoing efforts to divest Green Giant U.S. frozen in Q3.
* Guidance was narrowed in Q3 to $1.82 billion to $1.84 billion in net sales, compared to $1.83 billion to $1.88 billion in Q2, reflecting completed divestitures.
* EBITDA guidance remained largely consistent, with slight narrowing to $273 million to $280 million.
* Management's tone shifted from cautious optimism in Q2, noting early signs of improvement, to a more focused discussion in Q3 on executing strategic portfolio actions and addressing cost efficiencies.
* Analysts maintained a consistent focus on the implications of divestitures, leverage reduction, and the recovery in key categories.

RISKS AND CONCERNS

* Management identified risks from ongoing consumer softness, potential negative volume impact from pricing initiatives to offset tariffs, trade negotiations, and the possibility of a softer holiday season or retailer destocking.
* Wacha cautioned, "We live in an uncertain world, however, and so the risks to our guidance include increased challenges in an already difficult consumer environment, a greater-than-expected negative volume impact as the result of our pricing initiatives to offset tariffs, trade negotiations and the potential impact of any increased or retaliatory tariffs, a softer-than-expected holiday season or any destocking or other inventory management by our retail customers."
* Keller acknowledged potential temporary impacts from SNAP benefit cutbacks and government shutdowns but indicated it is "too soon to know whether it will matter."

FINAL TAKEAWAY

B&G Foods is actively reshaping its business with a series of divestitures, including the pending sale of Green Giant Canada, aiming to create a leaner, more focused portfolio. Management expects these actions to improve margins, increase cash flow, and lower leverage toward 5x. Guidance for 2025 is narrowed to reflect these completed and pending divestitures, with continued emphasis on cost savings and operational efficiency. While macroeconomic and industry risks remain, the company is prioritizing portfolio simplification and debt reduction as key steps toward long-term stability and growth.

Read the full Earnings Call Transcript [https://seekingalpha.com/symbol/bgs/earnings/transcripts]

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