TreeHouse Foods (THS) Q2 Sales Up 1.5% | The Motley Fool

TreeHouse Foods (THS -6.88%), a major supplier of private label packaged foods to retail and foodservice customers, posted its second quarter fiscal 2025 results on July 31, 2025. The release delivered several highlights: adjusted net sales came in at $801.4 million, beating the analyst estimate of $788.042529 million by $13.357471 million (non-GAAP) and exceeding the high end of adjusted guidance. Adjusted earnings per share was $0.17. While profitability benefited from margin expansion and cost control, organic sales volume declined, and the quarter also included non-recurring insurance recoveries. Overall, the period reflected disciplined execution on margin, even amid negative trends in underlying product volume.

Source: Analyst estimates provided by FactSet. Management expectations based on management’s guidance, as provided in Q1 2025 earnings report.

About TreeHouse Foods and Strategic Focus

TreeHouse Foods operates as a prominent private label packaged food producer. It makes a wide portfolio of products, from snacks and beverages like tea and coffee to cookies, pretzels, and frozen foods. It supplies top retailers, including major names such as Walmart, and also serves foodservice operators throughout North America.

Recently, the company sharpened its focus on high-growth, high-margin product categories—moving away from less profitable segments like meal preparations and ready-to-drink beverages. Key success factors are strong supply chain execution, resilience in sourcing and costs, and the ability to manage customer relationships. TreeHouse Foods continues to optimize its portfolio, acquiring businesses in tea and other healthy snacking areas, while consolidating lower-margin or more complex product lines.

Quarter in Review: Results, Drivers, and Notable Developments

This beat came from several drivers: the recent acquisition of Harris Tea, favorable pricing designed to offset commodity cost inflation, and increased distribution (non-GAAP).

The results did mask some underlying pressure. Organic volume and mix—a measure of underlying customer demand and product mix—declined 6.2%. This dropped as the company continued its margin management strategy, intentionally withdrawing from certain lower-margin offerings and prioritizing profitable product lines. The exit from the ready-to-drink beverage line and disruption from a prior frozen griddle product recall also reduced volume.

Gross profit margin (GAAP) improved by 1.1 percentage points to 17.4%. Non-recurring insurance recoveries of $13.1 million, tied to product recalls, played a large role in this increase. The company also cited ongoing benefits from supply chain efficiency projects and the Harris Tea acquisition. Operating expenses (GAAP) fell by $20.4 million year over year, aided by the absence of a $19.3 million GAAP impairment charge recorded in Q2 2024 and lower administrative costs, reflecting continued cost control efforts.

Notably, other expenses (GAAP) rose to $32.9 million, up from $16.9 million in Q2 2024. This stemmed from hedging losses on commodity and interest rate contracts, primarily related to coffee prices, along with an increase in interest expense of $6.6 million year-over-year, primarily due to higher borrowings on the Revolving Credit Facility. The resulting net loss (GAAP) narrowed dramatically from the previous year, coming in at $2.9 million versus $16.7 million in Q2 2024. Adjusted EBITDA, which strips out non-recurring and certain non-cash charges, rose 3.8% year-over-year.

The product highlight for the quarter was the contribution from tea, thanks to the Harris Tea acquisition. Despite pressures in frozen and ready-to-drink items—both affected by a recall and the decision to exit low-yield product lines—the company aimed to run facilities more efficiently and serve customer needs better. The recall of frozen griddle (waffle) products, while a temporary setback, is being resolved, with insurance recoveries helping offset the short-term operational hit.

Customer concentration remained a key feature of the business. Dependence on very large retail partners continues to present a strategic risk, and liquidity declined as cash on hand dropped to $17.1 million.

Outlook and Guidance

Looking ahead, management reaffirmed its full-year targets for adjusted EBITDA and free cash flow. It expects adjusted net sales (non-GAAP) for FY2025 between $3.36 billion and $3.415 billion, representing between a 0.5 % decline and 1 % growth from the prior year. Volume/mix is still expected to decline by about 1% in fiscal year 2025, with pricing is expected to provide a low-single-digit percentage benefit. For the third quarter, the company anticipates flat sales growth, with adjusted net sales expected in the range of $840 million to $870 million, with adjusted EBITDA guidance given at $90 million to $110 million. Management guided to continued pressure on organic volume due to ongoing portfolio management, but expects pricing and category recovery, particularly as the griddle facility returns to full strength, to help in the second half of the year.

Investors should monitor a few key signals going forward. These include the integration and performance of the Harris Tea acquisition. Balance sheet dynamics will be in focus, as higher interest costs and inventory levels place some strain on short-term liquidity and cash flows.

Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.