The consumer staples sector is facing several hiccups over the past few quarters as consumers are spending less and demand is declining. Investors can still expect a healthy return in this sector by investing in TreeHouse Foods Inc. (THS) as this player is playing well despite of all odds.
About this great player
TreeHouse is a food manufacturer servicing primarily the retail grocery and foodservice distribution channels. The company's products include non-dairy powdered creamers, private label canned soups, salad dressings and sauces, powdered drink mixes, hot cereals, macaroni and cheese, skillet dinners, Mexican sauces, jams and pie fillings, pickles and related products, aseptic sauces, refrigerated salad dressings, and liquid non-dairy creamer. It is the largest manufacturer of pickles and non-dairy powdered creamer in the United States, and the largest manufacturer of private label salad dressings, powdered drink mixes, and instant hot cereals in the United States and Canada, based on sales volume.
The company manufactures and sells private label products to retailers, such as supermarkets and mass merchandisers, for resale under the retailers' own or controlled labels; private label and branded products to the foodservice industry. TreeHouse operates in three segments: North American Retail Grocery, Food Away From Home, and Industrial and Export. This player has a broad portfolio across dry groceries and is a leader in 18 grocery categories shown below.
A look at the recent performance
On Nov. 6, the Oak Brook, Illinois-based company reported third quarter adjusted earnings per share, which increased 8.5% to $0.89 compared to $0.82 in the prior year. Adjusted EBITDA for the quarter was $103.5 million, a 32.7% increase compared to the prior year. Improved volume/mix and acquisitions are the main catalysts for the increase in adjusted EBITDA. Net sales jumped to $795.7 million compared to $567.2 million last year, an increase of 40.3%, largely due to sales from acquisitions and favorable volume/mix in each of its segments.
Gross margins in the third quarter decreased to 19.9% from 20.3% last year. This is mainly because of lower margin business from acquisitions, and the related acquisition and integration costs offset an improved sales mix and operational efficiencies. Unfavorable foreign exchange rates also contributed to the decrease. Selling, distribution, general and administrative expenses increased $30.8 million in the third quarter this year, or 47.7%, to $95.5 million from $64.7 million in the same period last year. Further, after considering the impact of acquisition and integration costs in each year, selling, distribution, general and administrative expenses as a percentage of net sales was 10.9% for the third quarter of 2014 compared to 10.7% in 2013.
Other expenses for the third quarter was $17.2
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