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Simply Good Foods shares cratered today, dropping 17% today after co reported "solid" fiscal Q4 but warned of softness early next year as it continues to rationalize Atkins biz while dealing with fallout from quality issue that may have soured some shoppers on its acquired OWYN plant-based brand. It anticipates fiscal 2026 sales will come in somewhere in range of 2% decline and 2% gain, after co grew by at least high-single-digits over past 5 years. Gross margin is anticipated to contract 1-1.5 pts, with rising cocoa costs and tariffs partly to blame. Pricing action that was announced to trade in Aug and is due to go into effect in Jan was in mid- to high-single-digit range but should only stunt sales briefly, in category that's proved over years to be highly resilient to increases, prexy/CEO Geoff Tanner reassured investors this morning. Net sales in Q4 rose 1.8% to $369 mil, +3.5% on organic basis, excluding 6.9% headwind from lapping extra week in year-earlier period. OWYN Acquisition contributed $5.6 mil, or 1.5 pts, of sales growth. Gross margin narrowed by 4.5 pts to 34.3%. Operating line fell into $11.8 mil loss, reversing $47.8 mil profit a year earlier. Simply took $60.9 mil impairment charge on Atkins as it continued to cut brand back to its strongest-performing sku's and tilt more retail shelf space to its growing Quest and OWYN marques. Once the sole focus of co, Atkins accounts for mere 25% of total sales today, co reminds investors. For full yr, sales rose 9% to $1.45 bil. Operating income declined 24% to $156.9 mil."Solid" was word of CEO Tanner for results, despite some of the jarring elements this morning. He pointed to steady progress on several fronts: "We largely completed the integration of OWYN, invested meaningfully in our brands and capabilities despite inflationary pressures, and leveraged our strong cash flow to improve our balance sheet and return cash to shareholders," he said. Like other CEOs these days like Keurig Dr Pepper's Tom Cofer, who likes to talk of maintaining a "challenger" mentality, Tanner believes he can TK the virtues of bigness while avoiding complacency in category awash with incumbent and insurgent brands. "We are building an organization that combines the agility and speed of an insurgent challenger with the advantages of scaled selling and supply chain capabilities," he assured shareholders.Among 3 key platforms, Quest continued its robust growth. As we reported from NACS, it's readying launch of broadly targeted 45 g Protein Milkshake line while also planning protein smoothie line for spring (BBI, Oct 16). But much of the action is to expand into other parts of store via protein-rich cookies, baked items and even doughnuts in early 2026, with co about to invest in another production line at unnamed copacker that will offer capacity increment and greater flexibility. Year-old campaign that positions brand as "basically cheating" in offering protein bounty in low-carb indulgences had immediate impact that Tanner said he's rarely seen in his 25 yrs of marketing. Now it's airing on Thurs Night Football as well as across digital and social platforms.Atkins continues to flounder as Simply execs cut their losses, dropping low-performing sku's, especially at club and mass, and trying to coax retail partners into replacing some of the lost space with Quest and OWYN entries. On bev sides, its shake biz was down 4% in Q4, -2% for full year, tho Strong subline at 30 mg helped prop up biz. As encouraging sign, Tanner cited unnamed retail partner where remaining sku's enjoyed nice uptick in velocity after winnowing. And brand went back to the future last month, returning to ads that stressed its weight-maintenance benefits rather than general lifestyle enhancer. There's a key packaging change too: instead of its entry-level 5-pks competing with rivals' 4-pks at higher price, it will join the herd with move to 4-pks itself.As for acquired OWYN (Only What You Need) brand, its smooth upward trend was interrupted by quality issue on pea protein ingredient that had been purchased prior to acquisition and proved to degrade on shelf, not posing any safety issue but deteriorating in taste and texture. Tho issue was confined to less than 10% of inventory, consumers were not shy about posting their complaints on rating and review sites and velocity decelerated. After moving to better formulation in Aug that should be fully in market by fiscal Q2, OWYN has begun aggressive customer marketing activity to reaccelerate brand, Tanner reported. Still, as testimony to brand's rapport with many shoppers, OWYN shakes still managed to grow by 11% and its powder biz more than doubled, he said. "We continue to be extremely confident about the trajectory of this business . . . very pleased we acquired this business," he said. He teased some "disruptive innovation" under OWYN name due next yr. It's not clear to us who's running OWYN now: as we reported, former OWYN CEO Mark Olivieri departed quietly and Simply website lists as svp/gm's just Stuart Heflin on Quest side and Ryan Thomas on Atkins side.

Simply Good Food Shares Sag as Anticipated Growth Flattens; Sales Up Mere 2% in Q4 as Atkins Rationalization Proceeds, OWYN Takes Hit from Pea Protein Issue

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