Lower fruit prices reflected in lower sales in Calavo’s quarterly results

For the quarter ending Oct. 31, lower avocado prices hurt overall sales and profits for Santa Paula, Calif.-based Calavo Growers Inc.

During the fourth quarter of the company’s 2020 fiscal year, the company reported total revenue of $234.4 million, a 20% decrease year over year, according to a news release. The decline in revenue, the company said, reflected 3% growth in avocado volume offset by 22% lower avocado prices and lower revenue in the Renaissance Food Group and Foods segments.

“Avocado volumes increased due to rising popularity in the U.S. and abroad,” James Gibson, CEO of Calavo Growers, said in the release.

“With strong crops out of both Mexico and California, supply in the fourth quarter was plentiful, lowering the average selling price by 22% versus the year-ago quarter, when supply was very constrained.”

Gibson said in the release that many foodservice outlets remained unavailable to absorb the crop size and quality dispersion, which has historically helped to maintain margins. 

“Our RFG segment continued to be impacted by the closure of our co-packing partner in the Midwest in April 2020,” he said. “When excluding the impact of this closure, sales in our RFG segment rose 3% year-over-year, overcoming the impact from the pandemic.” The company’s Foods segments, he said, continued to be adversely affected by lower foodservice demand resulting from the pandemic, offset slightly by favorable input commodity prices.

For the quarter ending Oct. 31, Calavo reported:

• Fourth quarter 2020 sales in Calavo’s Fresh business segment decreased 18% to $118.9 million from $144.5 million in the same period last year;
• The average selling price of avocados was down 22% from the same period last year;
• Avocado volume improved 3% from the year ago period;
• Fresh segment gross profit for the fourth quarter of 2020 was $8.8 million, or 7.4% of segment sales, compared to $12.5 million, or 8.7% of segment sales, for the same period last year;
• Renaissance Food Group RFG business segment sales in the fourth quarter 2020 were $99.3 million, down 21% from $125.5 million in the same period last year;
• Sales in the Foods business segment totaled $17.9 million in the fourth quarter, down 25% from $23.8 million in the same period last year due to lower demand from foodservice customers during the prolonged pandemic.

Outlook

Because of the impact of the pandemic, Calavo previously suspended its practice of providing annual guidance, according to the release. However, in the news release, Calavo offered some expectations for the first fiscal quarter of 2021:

• Revenue in a range of $215 million to $225 million; and
• Adjusted EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) in a range of $7 million to $10 million.

“As we enter 2021, we expect more of the same across our three segments,” Gibson said. “For Fresh, the Mexican crop is expected to be larger than it was in 2020, which will continue to pressure selling prices. We expect foodservice outlets will remain unavailable to take sizes and quality of avocados that are not desired by our retail customers until the latter half of 2021. Our RFG segment will be impacted by the Midwest closure comparatively through April 2021, and Foods will still be dependent on recovery of the foodservice category.”

Regardless of these near-term trends, Gibson said in the release that the company expects to emerge from the pandemic a stronger organization.
“We believe that the steps we are taking today will not only create value in the near term but will also strengthen our foundation to accelerate growth in the years ahead,” Gibson said in the release.