Strategic Margin Management and Cost Structure Reset in 2025
TreeHouse Foods has initiated a margin management plan starting in Q4 2024, leading to deliberate pricing and distribution choices to improve efficiency.
The company is focusing on controlling costs, reducing structural expenses, and optimizing plant capacity, including closing two plants in pickles and cookies categories.
The goal is to deliver $250 million in gross supply chain savings through 2027, with a strategic emphasis on profitability and cash flow over volume growth.
Management emphasizes that most of the margin management activities are behind them, setting the stage for a potential growth year in 2026.
Tariff and Trade Environment Impact and Mitigation Strategies
The company expects around $10 million in tariff-related costs for the full year, with most impact in Q4, due to inventory pre-exposure and sourcing adjustments.
Central has reduced China purchases by nearly 50% in Q3, shifting sourcing to mitigate tariff impacts, and is working on pricing strategies to offset cost increases.
Management highlighted ongoing efforts to work with customers and suppliers to limit margin erosion, with a cautious outlook on future tariff developments.
Adjusted gross margin increased 200 basis points to 54.1%, driven by higher quality inventory, lower discounts, and FX.
Adjusted loss per share was $0.24 versus $0.35 in Q1 last year.
Adjusted operating margin was negative 3.2%, up 270 basis points year-over-year.
Excluding Vans, revenue was up 5%.
Inventories were up 4% or $76 million, excluding FX impact inventories were up 1%, with improved inventory quality and 4% lower inventory days year-over-year.
Net debt was down $1.4 billion or 20% versus last year.
North Face grew 5%, Timberland grew 9%, and Vans declined 15%, with 40% of Vans decline due to channel rationalization.
Q1 revenue was $1.8 billion, flat on a reported basis and down 2% year-over-year in constant dollars, better than guidance of down 3% to 5%.
SG&A dollars were flat year-over-year, reflecting cost savings.
Brinker's 3-Year Turnaround Achievements and Future Outlook
Brinker has completed three years into its turnaround plan, with consistent positive results over seven quarters of outperformance in traffic and sales growth.
The company's average restaurant volume increased from $3.1 million in 2022 to $4.5 million in 2025, reflecting significant operational improvement.
Brinker's restaurant operating margin improved from 11.9% in 2022 to 17.6% in 2025, driven by menu simplification, increased labor investment, and better equipment.
The company paid down over $570 million of debt in three years, reducing leverage to 1.7x and strengthening its balance sheet.
Management emphasizes that the brand is fundamentally different today, with a focus on fundamentals, marketing, and operational excellence.
Adjusted diluted EPS increased 28% to $1.19 per share, significantly outpacing adjusted EBITDA growth due to accretive share repurchases.
Adjusted gross profit grew 5% to $1.8 billion, supported by volume growth, improved cost of goods, disciplined inventory management, and increased private label penetration.
Net sales increased 3.8% to $10.1 billion, driven by 0.9% case volume growth and 2.9% food cost inflation and mix impact.
Operating cash flow increased by $104 million to $725 million year-to-date, supporting record capital investments and $273 million in share repurchases.
US Foods delivered record second quarter adjusted EBITDA of $548 million, a 12% increase year-over-year, with an all-time high adjusted EBITDA margin of 5.4%, up 40 basis points.
ADM reported adjusted earnings per share of $0.93 for Q2 2025 with total segment operating profit of $830 million.
AS&O segment operating profit was $379 million, down 17% year-over-year due to margin pressures from legislative and biofuel policy uncertainty.
Carbohydrate Solutions segment operating profit was $337 million, down 6%, with declines in EMEA due to higher corn costs and crop quality issues.
Cash flow from operations before working capital was down year-over-year due to lower segment profits, but inventory management improved with a $2.2 billion decrease in inventories.
Crushing subsegment operating profit declined 75% to $33 million, impacted by lower crush margins in soybeans and canola, especially in North America.
Leverage ratio was 2.1x at quarter end, with capital expenditures lowered to a range of $1.3 billion to $1.5 billion for 2025, down from prior guidance.
Nutrition segment revenues increased 5% to $2 billion, with operating profit up 5% to $114 million, driven by Flavors growth and Animal Nutrition margin improvements.
Refined Products and Other subsegment operating profit increased 14% to $156 million, helped by positive timing impacts despite lower biodiesel and refining margins.
Returned $495 million to shareholders in dividends during the first half of 2025.
Trailing four-quarter adjusted ROIC was 6.9%, and cash flow from operations before working capital changes was $1.2 billion for the first half of 2025.
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