Simply Good Foods Earnings: Quest Strength Offsets Margin Headwinds
- Hardik Shah
- 3 days ago
- 3 min read
TL;DR
Revenue Strength: Quest and OWYN drove consumption growth, offsetting expected Atkins declines.
Margin Trends: Tariffs and cocoa inflation pressured gross margins, with recovery expected in 2H.
Forward Outlook: Full-year guidance reaffirmed; second-half inflection remains central to the thesis.
Business Overview
The Simply Good Foods Company is a Consumer Packaged Goods (CPG) company focused on nutritional snacking, with a portfolio anchored by Quest, Atkins, and OWYN. The company competes at the intersection of high-protein, low-sugar, and low-carbohydrate eating, categories that continue to gain mainstream adoption.
The portfolio is heavily North America–weighted, with Quest representing the largest and highest-margin brand. Distribution spans traditional grocery, mass, club, e-commerce, and select unmeasured channels. Growth is increasingly concentrated in Quest salty snacks and OWYN ready-to-drink (RTD) beverages and powders, while Atkins continues to undergo distribution and assortment rationalization .
Simply Good Foods Earnings
For the fiscal first quarter ended November 29, 2025, Simply Good Foods reported net sales of $340.2 million, down 0.3% year over year. Quest net sales grew 9.6%, while Atkins and OWYN declined 16.5% and 3.3%, respectively, reflecting expected distribution losses at Atkins and lingering inventory effects tied to prior OWYN product quality issues .
Gross profit declined 15.8% to $109.9 million, with gross margin contracting 590 basis points to 32.3%, driven primarily by elevated input costs, including tariffs and cocoa inflation. Excluding one-time integration and purchase accounting items, gross margin was 33.1%, still down materially year over year.
Adjusted EBITDA fell 20.6% to $55.6 million, while Adjusted Diluted EPS declined to $0.39, compared with $0.49 a year ago. Net income totaled $25.3 million, reflecting both margin compression and one-time costs. Operating cash flow improved to $50.1 million, supported by favorable working-capital movements.
Forward Guidance
Management reaffirmed full-year fiscal 2026 guidance:
Net sales: -2% to +2% year over year
Gross margin: Down 100–150 basis points
Adjusted EBITDA: -4% to +1% year over year
Second-half performance remains the critical inflection point, as pricing, productivity, and easing input costs are expected to begin outweighing first-half inflation and tariff pressures.
As Chief Executive Officer Geoff Tanner stated,
“With our initiatives to accelerate our top line and rebuild our margins in the second half on track, we are reaffirming our full year outlook.”
Operational Performance
Execution remained aligned with internal expectations. Quest continued to benefit from expanded distribution, innovation, and merchandising, while Atkins declines were largely attributed to planned distribution exits. OWYN consumption grew double digits, despite shipments lagging due to elevated retailer inventory and prior quality disruptions.
On cost control, management emphasized the progress of its multi-year productivity program and improving input cost visibility. During the earnings call, Tanner noted,
“Our robust productivity program… is delivering results, taking costs out of the system and ensuring we have a multi-year pipeline of initiatives for the future.”
Market Insights
The nutritional snacking category grew approximately 10%, reflecting sustained consumer demand for protein-forward offerings. Retailers continue to prioritize velocity and space productivity, reinforcing Quest’s positioning while accelerating rationalization within slower-turning Atkins SKUs.
Tariffs and commodity inflation, particularly cocoa and whey, remain key near-term variables, though management expects partial relief beginning late in the fiscal year.
Consumer Behavior & Sentiment
Consumer demand remains strongest for high-protein, low-sugar formats, with Quest salty snacks delivering outsized household penetration gains. OWYN household penetration reached 4.5%, underscoring both momentum and long-term runway as marketing investment increases.
Management also highlighted early research connecting Atkins to GLP-1 usage, signaling a potential long-term relevance pathway as weight-management behaviors evolve.
Strategic Initiatives
Strategic priorities center on:
Scaling Quest salty snacks and innovation platforms
Rebuilding Atkins through price-point optimization and brand modernization
Expanding OWYN awareness, distribution, and innovation
Sustained productivity and pricing actions to restore margins
As Tanner emphasized on the call,
“The growth is being propelled by the mainstreaming of consumer demand for high protein, low sugar, and low carb products.”
Capital Allocation
Simply Good Foods significantly accelerated capital returns during the quarter, repurchasing 5.0 million shares for $100 million, and 7.4 million shares for $146.6 million fiscal year-to-date. The board also approved a $200 million increase to its share-repurchase authorization, leaving approximately $224 million available.
The company ended the quarter with $194.1 million in cash, $400 million in term-loan debt, and a net leverage ratio of 0.8x, maintaining substantial financial flexibility.
The Bottom Line
Simply Good Foods’ first quarter reinforced a familiar narrative: near-term margin pressure masking structurally attractive brand momentum. Quest continues to anchor growth and profitability, OWYN retains a long runway, and Atkins is being deliberately reshaped rather than defended at all costs.
The investment debate now hinges on management’s ability to deliver the promised second-half inflection and re-establish margin durability into fiscal 2027.
—Stay informed.
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