SMPL Q2 Deep Dive: Mixed Portfolio Performance Amid Category Growth and Margin Pressures

July 11, 2025 at 01:40 AM EDT

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Packaged food company Simply Good Foods (NASDAQ: SMPL) met Wall Street’s revenue expectations in Q2 CY2025, with sales up 13.8% year on year to $381 million. Its non-GAAP profit of $0.51 per share was in line with analysts’ consensus estimates.

Is now the time to buy SMPL? Find out in our full research report (it’s free).

Simply Good Foods (SMPL) Q2 CY2025 Highlights:

Revenue: $381 million vs analyst estimates of $380.5 million (13.8% year-on-year growth, in line)
Adjusted EPS: $0.51 vs analyst estimates of $0.50 (in line)
Adjusted EBITDA: $73.85 million vs analyst estimates of $72.17 million (19.4% margin, 2.3% beat)
Operating Margin: 15.6%, down from 17.6% in the same quarter last year
Market Capitalization: $3.25 billion

StockStory’s Take

Simply Good Foods delivered results in line with Wall Street’s expectations for the second quarter, driven by continued double-digit growth in its Quest and Owen brands, which now comprise roughly 70% of the company’s portfolio. CEO Geoff Tanner credited category momentum in high-protein, low-sugar snacks as a key driver, noting, “Quest approaches $1 billion in net sales and continues to see a long runway of opportunity.” However, ongoing declines in the Atkins brand, primarily due to distribution losses and reduced merchandising, weighed on overall performance. Management acknowledged margin pressure from inflation in inputs like cocoa and whey, partially offset by productivity and selective pricing actions.

Looking ahead, management expects Quest and Owen to remain the primary growth engines, emphasizing innovation, expanded distribution, and additional product formats. Tanner stated that Simply Good Foods is “uniquely positioned as a leader” in nutritional snacking, but also highlighted continued headwinds from inflation, tariffs, and ongoing distribution cuts at Atkins. CFO Chris Bealer said, “We expect the full benefit of productivity and pricing actions over the next twelve to eighteen months,” but cautioned that margin recovery will lag input cost increases. The company is prioritizing further cost management and targeted innovation to support sustainable growth.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to robust category demand for high-protein snacks, portfolio innovation, and strategic shelf space reallocations, but also highlighted ongoing margin pressures and channel-specific headwinds.

Quest brand momentum: Quest delivered double-digit consumption growth, benefiting from new product launches—such as the Overload bar and 45-gram milkshake—and expanded shelf space, especially in salty snacks, which saw retail takeaway grow over 30%.
Owen integration and growth: Owen achieved over 20% consumption growth, driven by increased distribution and successful spring resets. Management sees a long growth runway, with household penetration and awareness still well below peers.
Atkins distribution cuts: The Atkins brand continued to decline due to substantial distribution losses at key retailers and fewer merchandising events. Management is proactively pruning slower-turning SKUs and reallocating shelf space to higher-performing Quest and Owen products.
Margin pressure from input costs: Gross margins declined mainly because of higher cocoa and whey costs and the inclusion of Owen, which carries lower margins. The company is responding with stepped-up productivity initiatives and selective pricing, but these benefits are expected to phase in gradually.
Channel and format expansion: Simply Good Foods is investing in new channels and broader in-store placements, aiming to drive Quest and Owen growth beyond traditional aisles. Early signs from expanded merchandising and club store tests are encouraging for further physical availability.

Drivers of Future Performance

Simply Good Foods’ outlook is shaped by the continued strength of Quest and Owen, ongoing cost and margin pressures, and active management of the Atkins business.

Quest and Owen expansion: Management expects Quest and Owen to deliver ongoing double-digit growth through disruptive innovation, expanded distribution, and increased brand awareness. New product formats and physical availability in new channels are prioritized to capture shifting consumer demand for high-protein snacks.
Margin headwinds and mitigation: Elevated input costs, particularly for cocoa, as well as new tariffs, are expected to pressure gross margins in the near term. The company is accelerating productivity initiatives and evaluating further price increases, but margin recovery will likely be weighted toward the latter part of the next year.
Atkins portfolio restructuring: The company anticipates continued double-digit declines for Atkins due to planned distribution rationalization. Management’s strategy is to focus on core, higher-velocity SKUs and shift shelf space to faster-growing brands, potentially limiting the drag on total company growth over time.

Catalysts in Upcoming Quarters

Looking ahead, our analyst team will be watching (1) the pace and breadth of new distribution wins for Quest and Owen, especially outside traditional aisles and in new retail channels; (2) the effectiveness of margin recovery initiatives, including productivity programs and pricing actions, as input cost pressures persist; and (3) the impact of further shelf space rationalization at Atkins on overall portfolio mix. Progress in brand innovation and successful execution of channel expansion strategies will also be key markers of sustainable growth.

Simply Good Foods currently trades at $32.01, down from $32.36 just before the earnings. Is the company at an inflection point that warrants a buy or sell? Find out in our full research report (it’s free).

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