BOULDER, COLO. — A little over a year has passed since The Hain Celestial Group, Inc., acquired the ParmCrisps and Thinsters snack brands for a purchase price of $259 million. In the recent quarter, the company recorded pre-tax non-cash impairment charges of $156.6 million related to the business, which has experienced a significant loss in distribution, said Wendy P. Davidson, who joined Hain Celestial earlier this year as president and chief executive officer.

“It’s always tough to Monday morning quarterback and look back on decisions that were made, but we have spent a fair amount of time scrutinizing the assumptions that went into the acquisition and what has happened and transpired since,” Davidson said during a May 9 conference call to discuss third-quarter earnings.

ParmCrisps are baked snacks formulated with Parmesan cheese, and Thinsters are reduced-calorie, bite-size cookies.

“We believe in the better-for-you snacking category, absolutely, and this was a play in better-for-you snacking, certainly in high protein,” Davidson said. “So all of the consumer trends from that standpoint were correct. Where we potentially got it wrong… were probably in two ways; one is the reliance on keto as a diet relative to ParmCrisps and the subsequent decline in the keto category. That gave some consumer headwinds that probably weren’t as acutely anticipated at the time of the acquisition.”

The other factor she noted is customer and channel concentration.

“I think the thought was that the pacing of channel expansion would happen faster than the potential risk of channel concentration, and those two things were actually opposite,” Davidson said. “So, what you’re seeing right now is a factor of sort of recognizing where the brand sits today.”

The outlook for the business going forward is positive, she said.

“We’re just resetting a new starting point rather than anticipating recovery of that large customer concentration from before,” she said.

For the third quarter ended March 31, Hain Celestial had a loss of $115.7 million, which compared with net income of $24.5 million in the prior-year quarter. Excluding the impairment charges, as well as other special items impacting comparability, adjusted net income was $7.4 million, compared with $29.7 million last year.

Net sales declined 9% to $455.2 million from $502.9 million a year ago.

North America segment operating loss was $136.1 million compared with operating income of $28.5 million the year before. Adjusted operating income was $21.2 million compared with $31.4 million. Segment sales decreased 12% to $286.6 million, driven by lower sales in snacks, personal care and tea, partially offset by higher sales in yogurt. The decline in snacks was driven by reduced distribution and customer promotions associated with the ParmCrisps brand.

“In North America, two of our largest brands, Greek Gods and Earth’s Best, both grew with double digits,” Davidson said. “Within snacks, the primary driver of our weaker-than-expected top-line results in the quarter was Sensible Portions. The Sensible Portions brand has been trending up double digits fiscal year-to-date, but trends slowed within the quarter due to competitive spending in brand building and promotion.

“As you will recall, in 2022, we pulled back on brand building, given supply chain impacts on service levels. With the supply chain challenges largely behind us, we are now just beginning to reinvest in brand building, in innovation and in-store promotions and are confident in the long-term growth outlook for this brand.”

International segment operating income was $13.6 million, down 26% from the year before. The decline was driven by higher energy and input costs and volume mix partially offset by improved pricing and productivity.

“The international segment performed broadly in line with our expectations while also improving sequentially across all key metrics,” Davidson said. “Our business continues to strengthen due to the stabilizing macro environment, our participation in both branded and private label as consumers seek out value, execution of our planned pricing, distribution gains and improving service.”

Management has updated its full-year guidance and now expects adjusted net sales down 3% to 4% from the prior year and adjusted EBITDA at constant currency to be down 13% to 15%.

“While the rest of the year is not where we would like, our detailed review of the business has me optimistic about the future, and I’m focused on setting the company up for future success,” Davidson said. “We have already started to invest behind our brands and are in the active stages of our strategy assessment and development. I continue to have confidence in the future potential of our brands and our portfolio and our ability to return to profitable growth. Although our starting point is lower than previously believed and we have work to do to transform the business, we have already made progress building capabilities to drive operating improvements and efficiencies.”

Shares of Hain Celestial trading on the New York Stock Exchange closed on May 9 at $15.42, down 12% from $17.61 the day before.