Del Monte Foods Co. released its fiscal 2011 first quarter results, which included a 3.6% net sales growth in the company's pet products segment. First quarter net sales declined 1.1% overall to US$804.6 million, driven by the 3.6% growth in pet products and an approximately 6% decrease in consumer products.
Diluted EPS from continuing operations of US$0.29 decreased US$0.01 from a record first quarter EPS of US$0.30 in fiscal 2010. Net sales is now expected to grow 1% to 3% for fiscal 2011, compared to prior expectations of 2% to 4%.
"Our 1.1% topline decline reflects lower revenue from our consumer business with continued healthy topline performance in the pet business," said Richard G. Wolford, chairman and CEO of Del Monte Foods.
For the first quarter, pet products net sales were US$427.3 million, an increase of 3.6% over net sales of US$412.3 million in the prior year period. The increase in pet products net sales was primarily driven by strong unit volume growth (particularly in dry petfood), supported by higher levels of trade spending. In addition, pricing (driven by the previously implemented package resizing) and new product volume positively impacted net sales.
Pet products operating income decreased from US$102.8 million in first quarter fiscal 2010 to US$98.7 million in first quarter fiscal 2011, a decline of 4%. Higher marketing investment and higher G&A expense more than offset the positive impact of the topline.
At 23.1% for the first quarter of 2011, operating margin for pet products was at a historically high level in comparison to the last several years, although it decreased 180 basis points versus the same period in 2010. Higher gross margin (due to favorable mix) was offset by higher SG&A as a percentage of sales (driven primarily by higher marketing investment compared to a year ago behind Milk-Bone and Kibbles 'n Bits products).