Calavo Growers releases quarterly results, cites challenging market conditions
Reporting a double-digit decline in total revenue, Santa Paula, Calif.-based Calavo Growers Inc. reported quarterly results for its fiscal quarter ending Jan. 31.
The company reported total revenue of $226.2 million for the quarter, an 18% decline from the same period the prior year, according to a news release. Grown segment revenue decreased 27% year-over-year to $117.7 million, according to the company, while prepared segment revenue decreased 3% year-over-year to $108.5 million.
The company reported avocado prices for the first quarter were 35% lower year-over-year, and avocado volume was 3.4% higher, the release said.
Results were pressured by low avocado prices and compressed margins, particularly for small fruit, driven by high volumes of Mexican avocados, according to the release. Prices at retail did not decline in proportion to the average wholesale case price decline, which may have dampened demand in the quarter, the company said.
Performance was also negatively affected by the strengthening peso relative to the U.S. dollar, which increased operating costs in Mexico in dollar terms, the company said.
Industry volume of avocados from Mexico was up 8% over the fiscal first quarter, according to the release.
“Our first quarter results were impacted by challenging market conditions in both the Grown and Prepared segments,” Brian W. Kocher, president and CEO of Calavo Growers, said in the release.
“Grown segment performance was challenged by low avocado prices and margins, driven by increased volumes of Mexican avocados. Prepared segment performance was affected by volume softness and winter weather that led to higher operating costs including from temporary facility closures," he continued.
Grown segment market conditions started to recover in February, and the company realized avocado margins within its targeted range of $3 to $4 per case for most of the second quarter, Kocher said in the release. However, supply pressure may lead to ongoing volatility in avocado margins, he said in the release.
In addition, volume softness in prepared may persist in the near term as data indicates volume sales have been down broadly across retail food categories.
“The operating environment, coupled with our first quarter results, has caused us to lower our fiscal year margin expectations for both segments,” Kocher said in the release.
Fiscal 2023 avocado gross margins per case are expected to be at or near the low end of its $3 to $4 target range, the company said.
The outlook reflects first quarter results and the expectation that margins may remain under pressure as the California and Peru seasons get underway, the release said.
“Despite a challenging start to fiscal 2023, we remain focused on making changes to the business that will deliver ongoing value,” Kocher said in the release. “We recently finalized plans to restructure some of our operations.”
The plans include the following:
- Restructuring certain corporate and administrative functions to upgrade capabilities and to reduce costs.
- Consolidating activities in its grown distribution network to streamline operations and generate savings.
- Exiting the non-core salsa business in its prepared segment.
The activities are expected to generate annual savings of at least $1.5 million, with one-time charges of approximately $3.2 million, the release said.
