Dreyer's reports net loss widens in Q1 on higher costs

by FoodBusinessNews.net Staff
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OAKLAND, CALIF. — Dreyer's Grand Ice Cream Holdings, Inc. today reported a net loss of $101,839,000, or $1.07 per diluted common share, for the quarter ended March 26. That compares with a loss of $80,361,000, or 85c per diluted common share, for the quarter ended March 27, 2004.

Net sales of company brands for the first quarter of 2005 increased $36,529,000, or 14%, to $289,976,000 after promotional costs. The increase was driven by net sales increases for the company's premium and superpremium products reflecting continued strong sales of premium Dreyer's and Edy's Slow Churned Light ice cream, classic Dreyer's and Edy's Grand ice cream and Haagen-Dazs branded superpremium products.

The increase also reflects an increase in net sales of the company's frozen snacks primarily based on the addition of Skinny Cow ice cream products to the company-owned portfolio following the acquisition of Silhouette Brands, Inc. in July 2004.

ACNielsen data on the U.S. grocery channel shows that Dreyer's company brands of packaged ice cream grew 10% in the quarter ended March 26 and reached a dollar market share of 23% for the quarter, the highest first-quarter share ever held by the company. Net sales of partner brands, products distributed for other manufacturers, decreased $25,043,000, or 34%, to $47,569,000 for the first quarter of 2005. The decrease is primarily based on the classification of the sales of Skinny Cow as company brands during the period.

The decrease also reflects reduced net sales of certain other brands and the termination of certain distribution agreements.

The decrease was partially offset by the classification of the sales of the Dreamery, Whole Fruit Sorbet and Godiva brands as partner brands following a September 2004 agreement with Integrated Brands, Inc., a subsidiary of CoolBrands International, Inc. Other revenues decreased $4,198,000, or 36%, to $7,626,000 for the first quarter of 2005. The decrease in other revenues was driven primarily by a $4,011,000 decrease in revenues received from Integrated Brands for transitional manufacturing and distribution.

Total net revenues increased $7,288,000, or 2%, to $345,171,000 for the quarter.

Cost of goods sold increased $22,320,000, or 7%, to $338,663,000 for the first quarter of 2005. The increase was driven by increased sales; higher product costs, including an approximate $4,400,000 increase in the cost of cream; and higher distribution expenses.

The increase was partially offset by a decrease in drayage expense paid to CoolBrands for the delivery of certain of the company's products.

The company's gross profit decreased by $15,032,000 to $6,508,000 for the first quarter of 2005, representing a 2% gross margin compared with a 6% gross margin for the same period in 2004.

The decrease was driven by increased promotional costs associated with new product launches and the higher cost of goods sold, partially offset by a product mix shift from sales of lower margin partner brands to higher margin company brands.

Selling, general and administrative expense decreased by $10,160,000, or 21%, to $38,206,000 for the first quarter of 2005, representing 11% of total net revenues, compared with $48,366,000, or 14% of total net revenues, for the same period in 2004. The decrease in expense in the quarter was primarily driven by decreases in marketing and bad debt expense.

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