Diamond Foods predicts record snack sales
Diamond Foods, Inc. (Nasdaq: DMND) executives predicted record snack sales of around $27 million for the fourth quarter ending July 31 on a conference call Monday evening.
“It would be our biggest quarter ever,” CEO Michael Mendes said on the call.
Mendes said the Stockton, Calif.-based company can achieve this goal through a marketing agreement with The Coca Cola Company (NYSE: KO) and an agreement that puts Diamond snacks in “virtually every [Safeway Inc. (NYSE: SWY) grocery stores] in the U.S.” The Coca-Cola agreement, which was announced on the call, is a summer promotion that places Diamond snack products with Diet Coke and Classic Coke in store displays.
Diamond expects growth to slow in fiscal 2008, but lower capital expenses are anticipated, Mendes said. Mendes noted the historic high prices of tree nuts as a factor. The company’s guidance for fiscal 2007 is $80 million in snack sales, compared with $41 million in fiscal 2006.
After the close of trading Monday, the company reported net sales of $97 million for the third quarter ended April 30, up 43% from $67.8 million in the year-ago period. The snack and food company reported a net loss of $4 million, or $0.25 a share, down from a $3.1 million loss, or $0.20 per share, in the third quarter of 2006. Analysts polled by Thomson Financial expected a loss of $0.16 per share on $82 million in revenue.
For the snack company, COO Gary Ford said on the call the commodity market outlook for tree nuts looks promising. The expected almond crop will be a record 1.31 billion pounds, Ford said, and the cashew crop is trending similarly. The pecan market, which has had three consecutive disappointing years, “looks good,” barring no hurricane damage to crops, he said.
Also on the call, Diamond executives said:
• The company expects 20% of Walmart Supercenter produce aisles to carry Diamond snacks
• The company’s five-year gross margin plan is 20%. It is currently 15%.
• They believe the current sales base is sustainable
• The company expects between 10,000 and 15,000 displays for the joint promotion with Coca-Cola
• The company will be rolling out new 15-second and 30-second commercials featuring entertainer Robert Goulet
