The Twinkie train rolls on 'even during times of recession,' Hostess CEO says
Hostess CEO Andy Callahan is not concerned about recession fears when it comes to selling a comfort food like Twinkies.
"First of all, even during times of recession or when times are good, consumers reach for permissible and indulgent snacks that they feel are at an accessible price point," Callahan said on Yahoo Finance Live (video above). "We're maniacal at making sure we provide the right value to our consumers when they have. The other thing that we really spend a lot of time over the last three or four years is focusing on our product quality. So when consumers come and they want an indulgent snack, they want it to be a good reward. They don't need a lot. But they need it in a portion-controlled form."
Recession-weary consumers appear to be on board with all of that enthusiasm.
Hostess reported this week that fiscal third quarter sales rose 20.1% from a year ago as the company was the latest food company to notch success pushing through price increases. Adjusted operating profits increased 12.2% from a year ago.
Here is how Hostess performed compared to Wall Street estimates:
Net Sales: $346.2 million vs. $323.5 million
Diluted EPS: $0.23 vs. $0.21
Hostess stock popped 7% on Thursday on the results. So far in 2022, shares of the sweet treat maker have gained 35% compared to a nearly 22% drop for the S&P 500.
The company also lifted its year outlooks for sales and profits: It sees sales rise in a range of 17% and 19%, up from 15% previously. And future earnings are pegged in a range of $0.96 to $0.98, up from $0.93 to $0.98 previously.
Wall Street continues to be mostly bullish on Hostess into 2023.
"While the company is facing more difficult volume comparisons in 1Q23, we see ongoing double-digit pricing, strong innovation (e.g. Bouncers), easing input cost inflation and easy supply chain cost comparisons as reasons for our 100 basis points of year over year gross margin improvement estimate in 2023 (EVRe 35.5%; cons. 35.1%)," Evercore ISI analyst David Palmer said in a note to clients.
Palmer reiterated an Outperform rating on the stock with a $29 price target.
Brian Sozzi is an editor-at-large and anchor at Yahoo Finance. Follow Sozzi on Twitter @BrianSozzi and on LinkedIn.
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