Inflationary pressures hurt Calavo’s latest quarter
Inflationary pressures eroded returns for Santa Paula, Calif.-based Calavo Growers Inc. for the quarter ended July 31, company officials said.
On Sept. 8 the company reported third quarter results:
- Total revenue of $285 million, a 5% increase from the year-ago quarter;
- Fresh segment revenue was flat year-over-year, and Renaissance Food Group and Foods segments revenue increased 14% and 12% year-over-year, respectively;
- Gross profit of $7.9 million, or 2.8% of revenue, compared to $30.8 million, or 11.4% of revenue, for the year-ago quarter;
- Net loss of $13 million, or 74 cents per diluted share, compared to net loss of $15.6 million, or 89 cents per diluted share, for the same period last year; and
- Adjusted net loss was $3 million, or 17 cents per diluted share, compared to adjusted net income of $12.9 million, or 73 cents per share last year.
In news also released Sept. 8, Calavo announced that James Gibson will retire as CEO, effective Sept. 9. Steven Hollister, a member of Calavo’s board of directors since 2008, will assume the role of interim CEO.
“Our results for the third quarter of this year were adversely impacted by inflationary pressures on labor, raw materials and freight, all of which accelerated as the third quarter progressed,” Hollister said in a news release.
“These factors taken together with the delayed summer avocado crops coming from California and Mexico impacted our margins and profitability.”
Hollister said in the release that Calavo is taking the necessary steps to mitigate the current higher cost environment and to navigate the tight labor market and various supply chain issues.
“While we are managing through challenging times, we are moving forward with the implementation of our strategic initiatives to increase the operating leverage and synergies across our entire organization, and we believe we will emerge as a stronger and more resilient company,” he said in the release. “The underlying fundamental drivers of our business remain intact, and we remain confident in the opportunities we have to accelerate growth in the years ahead.”
Avocado pricing and volume
Calavo said the average selling price of avocados in the company’s fresh segment was higher by 10% while volumes were 8% lower than the prior-year period due to the delayed start of the summer season in both California and Mexico. For Calavo’s third quarter ending July 31, sales in Calavo’s Fresh business segment were $161.6 million, essentially flat with $162.1 million for the same period last year.
The company said in the release that the long-term outlook for Calavo’s business is positive; however, Calavo said it is difficult to predict “when or if industry-wide inflationary pressures on raw materials, freight and labor costs will subside and the timing of and degree to which the company’s pricing initiatives will offset these pressures.”
Given those realities, Calavo said it will refrain from providing revenue or earnings expectations until the environment has stabilized.
In early trading on the NASDAQ exchange on Sept. 9, Calavo Growers common stock (CVGW) was trading at $42.51 per share, down about 10% from the previous close and about one-half of its 2021 high of $85.39 in March.
