After having reported a net loss in the fiscal fourth quarter of 2018, avocado and fruit supplier Calavo Growers seem to be recovering, according to their fiscal first-quarter 2019 report. Despite lower prices for the avocados compared to last year, Calavo Growers managed to increase their gross margin by over 17 per cent.
The largest segment of Calavo, fresh foods, saw its revenue decrease by 4.8 per cent year over year to $116.9 million. Although the company had an increase in avocado volumes by 7 per cent, this was offset by lower prices compared to last year. The gross margin still increased to 17.8 per cent: “We leveraged the company’s core strengths in fresh avocado sourcing, production and sales management to deliver sharply higher segment gross profit that contributed significantly to the aforementioned 17 percent increase in the company’s total gross profit.” The company states.
The Renaissance Food Group (RFG) segment rose more than 12 per cent compared to the prior year's result to $119.1 million. The FDA’s romaine lettuce advisory in November along with higher raw ingredient costs put pressure on the gross margin, falling to 3 per cent.
Calavo Foods is Calavo Growers’ smallest segment, supplying distributors and retailers with refrigerated, pressure-packed guacamole and packaged fruit products. Calavod Foods managed to increase their sales year over year by 16 per cent, reaching $22.1 million. Gross margin dropped 230 basis points to 29.1%. High sales did ensure that the prior year’s gross profit of $6 million was surpassed and stands at $6.4 million.
Calavo's operating income of $16.6 million left the comparable quarter’s operating income of prior year’s results ($10.8 million) far behind. Calavo did recognize a loss of $6.4 million in its interest in unconsolidated subsidiaries, which was primarily attributed to losses in the company's FreshRealm packaged-food and meal-kit subsidiary.
CEO Cole stated that Calavo moves forward in a “strong position and remains on target to post record revenues and double-digit increases in adjusted diluted earnings per share in fiscal 2019.” Cole continued: “We are extremely confident and optimistic about the course ahead in our Fresh business segment. Overall industry supply set new records this Super Bowl season, another indication that consumer demand for avocados continues to rise. As important, though, is that we saw strong post-Superbowl demand, which provides a positive early indicator heading into our fiscal second quarter. As an industry leader, with our strong portfolio of resources and diversified sourcing model, we are well positioned to take advantage of this category’s growth and expect Calavo avocado unit sales volume to rise by double digits once again this year.”