The Simply Good Foods Company (SMPL Quick QuoteSMPL - Free Report) reported first-quarter fiscal 2026 results, wherein both the top and bottom lines beat the Zacks Consensus Estimate but decreased year over year.

Management maintained its full-year outlook and highlighted a path toward margin improvement in the second half. Investor sentiment was positive, sending shares up 6.6% yesterday, fueled by strong consumption in the company’s growth brands and expectations of higher profits as cost pressures subside.

SMPL’s Quarterly Performance: Key Metrics & Insights

Simply Good Foods posted adjusted earnings of 39 cents per share, surpassing the Zacks Consensus Estimate of 36 cents. However, the figure decreased from the 49 cents reported in the same quarter last year.

The company reported net sales of $340.2 million, which beat the Zacks Consensus Estimate of $337 million. The metric decreased 0.3% from $341.3 million posted in the year-ago period. Growth at Quest of 9.6% was offset by declines at Atkins of 16.5% and OWYN of 3.3%. OWYN’s performance was impacted by lingering effects from the previously disclosed product quality issue and elevated retailer inventory levels at the beginning of the quarter.

North America revenues were $331.8 million compared with $332.4 million a year ago, reflecting a modest decline of 0.2% due to the mix of brand performance. International sales were $8.4 million compared with $8.9 million last year, down 5.7% year over year.

Total Simply Good Foods retail takeaway increased about 1.8%, Quest grew 12.0% and OWYN rose 17.8%, while Atkins declined 19.3%.

Insight Into SMPL's Q1 Margins & Expenses

Gross profit was $109.9 million, a decrease of 15.8% year over year, largely due to higher input costs and a full quarter of tariff-related expenses. Modest productivity gains partially offset these pressures. Gross margin was 32.3%, down 590 basis points. Excluding $2.6 million of one-time OWYN integration costs this year and a $1 million non-cash inventory step-up adjustment last year, gross margin was 33.1%, down 540 basis points.

Operating expenses declined 4.7% to $72.3 million. Selling and marketing expenses declined 10.1% to $29.7 million, reflecting planned reductions for Atkins that more than offset increased support for Quest and OWYN. General and administrative expenses totaled $38 million, down 0.2% year over year.

After excluding stock-based compensation of $3.6 million, integration costs of $3.3 million, term loan transaction fees of $2.8 million, and other non-recurring costs, general and administrative expenses declined 4.4% to $28.3 million, driven by synergy realization from OWYN and cost controls.

Adjusted EBITDA was $55.6 million, down 20.6% year over year. We note that the adjusted EBITDA margin declined 410 basis points year over year to 16.4% in the quarter under review.

SMPL Stock: Other Updates & Developments

At the end of the first quarter, Simply Good Foods reported cash of $194.1 million and a term loan balance of $400 million, resulting in a trailing 12-month net debt to adjusted EBITDA ratio of 0.8x. Operating cash flow improved to $50.1 million from $32 million last year, driven by working capital improvements. Capital expenditures totaled $2.1 million for the period.

The company repurchased approximately 5 million shares for $100 million during the quarter. Fiscal year-to-date through Jan. 6, 2026, share repurchases totaled 7.4 million for $146.6 million. The board increased the existing authorization by $200 million, leaving an estimated $224 million available for future repurchases.

What to Expect From SMPL in Q2?

The company expects the second quarter to be the weakest period of fiscal 2026 for both consumption and net sales growth. Net sales in the second quarter are anticipated to decline between 3.5% and 4.5% compared with the prior year, reflecting lingering price elasticities, the anniversary of elevated promotional activity from the prior year, and the residual impact of earlier product quality issues at OWYN.

Second-quarter gross margin is expected to decline approximately 300 basis points year over year, a sequential improvement from the first quarter as pricing and productivity begin to offset the effects of historically high cocoa costs, increased whey prices and tariffs. Adjusted EBITDA for the quarter is expected to decline by double digits year over year, slightly below the previous outlook due to more elevated whey costs than originally assumed.

SMPL Stock Past Three-Month Performance

Image Source: Zacks Investment Research

SMPL’s FY26 Guidance

For full fiscal 2026, the company reaffirmed its expectations for a recovery in top- and bottom-line performance beginning in the second half. Net sales growth is projected to fall within a range of negative 2% to positive 2%, with growth from Quest and OWYN being offset by declines in Atkins. 

Adjusted EBITDA is expected to range between a decline of 4% and an increase of 1% compared with the prior year, inclusive of increased marketing investments intended to support household penetration and brand awareness. 

Gross margin for the year is expected to decline between 100 and 150 basis points, with significant sequential improvement in the second half. The company expects third-quarter margins to be roughly flat year over year and fourth-quarter margins to expand close to 200 basis points, aided by the contribution of pricing, continued productivity benefits and early tailwinds from improved cocoa sourcing and tariff exemptions.

Capital expenditures are anticipated to fall between $30 million and $40 million, driven in part by previously disclosed co-investment intended to support additional salty snack production capacity. Management emphasized that the fourth quarter is expected to be the strongest period of profit growth, with adjusted EBITDA anticipated to grow at a double-digit rate year over year, setting up fiscal 2027 for improved margin performance.

This Zacks Rank #3 (Hold) stock has declined 14% in the past three months compared with the industry’s fall of 7.6%.

Stocks Looking Red Hot

Here, we have highlighted three better-ranked stocks, namely, United Natural Foods, Inc.  (UNFI Quick QuoteUNFI - Free Report) , McCormick & Company, Inc. (MKC Quick QuoteMKC - Free Report) and US Foods Holding Corp. (USFD Quick QuoteUSFD - Free Report) .

United Natural is the leading distributor of natural, organic and specialty food and non-food products, currently sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

UNFI delivered an earnings surprise of 52.1% in the trailing four quarters, on average. The Zacks Consensus Estimate for United Natural’s current fiscal-year sales and earnings indicates growth of 1% and 187.3%, respectively, from the year-ago reported quarter.

McCormick & Company is a leading manufacturer, marketer and distributor of spices, seasonings, specialty foods and flavors. It presently carries a Zacks Rank #2 (Buy). MKC delivered a trailing four-quarter average earnings surprise of 2.2%.

The Zacks Consensus Estimate for McCormick & Company’s current fiscal-year sales and earnings indicates a growth of 1.6% and a surge of 2.4%, respectively, from the year-ago reported numbers.

US Foods is a foodservice distributor and currently carries a Zacks Rank #2. USFD delivered a trailing four-quarter earnings surprise of 2.5%, on average.

The Zacks Consensus Estimate for US Foods’ current fiscal-year sales and earnings indicates rallies of 4.4% and 25.1%, respectively, from the year-earlier reported levels.