Simply Good Foods (NASDAQ:SMPL) reported third-quarter fiscal 2026 results ahead of management’s expectations, but executives said the business remains in the early stages of a turnaround as sales, margins and adjusted earnings declined sharply from a year earlier.
For the quarter ended May 30, 2026, the company reported net sales of $357 million, down 6.3% from the prior year. Gross margin declined 390 basis points to 32.5%, while adjusted EBITDA fell 22.5% to $57.2 million. President and CEO Joe Scalzo said the quarter “reinforced our belief that the actions we are taking are the right ones,” but added that the company is “not satisfied” with its overall performance.
Quest Remains Growth Engine, But Bars Remain Under Pressure
Quest, the company’s largest brand, posted net sales growth of 1.1% versus the prior year, while retail takeaway rose 1.4%. Household penetration increased 120 basis points year-over-year to 20.5%, which Scalzo said shows the brand “continues to recruit consumers” and remains relevant.
Within the Quest portfolio, chips remained a bright spot. Scalzo said Quest chips consumption grew more than 17% in the quarter, with household penetration reaching approximately 11%. He said consumers continue to seek “better for you salty snack alternatives.” Quest milkshakes also grew nearly 50%, though from a small base.
However, Quest bars continued to weigh on performance. Scalzo said bar consumption declined roughly 5% despite an incremental club rotation that began during the quarter. He called re-accelerating Quest bar growth the company’s “highest priority.” Management said the work includes improving top-of-funnel communication, aligning innovation with consumer preferences and increasing appropriate marketing support.
Scalzo said the company hired a new marketing agency for Quest with the goal of improving messaging to key consumers by reasserting the brand’s “superior nutritionals and taste,” especially in bars.
Atkins Declines Sharply as Household Penetration Falls
Atkins remained the weakest major brand in the portfolio. Net sales declined 24.6% in the quarter, and retail takeaway fell 23.9%. Scalzo attributed the decline to lower household penetration and related distribution losses, saying the brand had suffered from insufficient marketing support and inconsistent messaging that moved away from Atkins’ core weight management proposition.
Total Atkins household penetration stood at 8.5%, down 220 basis points from a year earlier. Scalzo said the company is focused on resetting the retail baseline and managing Atkins in a more disciplined, fact-based way.
“We do not believe Atkins needs to be a different brand,” Scalzo said. “Rather, it needs to become a better executed version of the brand consumers have trusted for decades.”
Management also said Atkins may have a role among consumers using GLP-1 therapies for weight management. Scalzo said the company recently completed an assessment of GLP-1 therapies and their impact on consumption behavior, but he declined to provide detailed strategic plans, saying more work is underway. He noted “high interactivity” between Atkins snack product buyers and GLP-1 use for weight management, which he said suggests the brand remains relevant to those consumers.
OWYN Faces Distribution Reset After Product and Marketing Issues
OWYN net sales grew 3.6% from a year earlier, while retail takeaway declined 1.3%, an improvement from a 2.4% decline in the prior quarter. Household penetration was flat year-over-year at 4.3%.
Scalzo said OWYN had been hurt by a product quality issue and ineffective marketing execution. The product issue has been addressed, but the company expects distribution losses over the next six to 12 months due to weak marketplace performance. He said management’s confidence in OWYN is based on the underlying consumer proposition rather than recent execution.
The company plans to focus OWYN on its core ready-to-drink and powder businesses. Scalzo said the challenges were mainly related to integration and execution rather than a lack of demand for clean-label, plant-based nutrition.
Margins Hit by Inflation, Restructuring and Impairment Charge
Chief Financial Officer Chris Bealer said gross profit fell 16.2% to $116.1 million, driven by volume declines, higher input costs and one-time restructuring costs tied to streamlining operations. Excluding $6.2 million in restructuring costs, gross margin was 34.3%, down 210 basis points from the prior year but ahead of the company’s forecast due to productivity initiatives.
Selling and marketing expenses increased 15.9% to $39.2 million, reflecting investments in selling capabilities and higher spending to support long-term brand growth. Excluding $1.1 million in one-time expenses related to a marketing agency change, selling and marketing expenses rose 12.7%.
On a GAAP basis, Simply Good Foods reported an operating loss of $49.9 million, compared with operating income of $59.3 million a year earlier. Bealer said the loss was primarily due to an $82 million non-cash impairment related to goodwill and the Atkins and OWYN brand intangible assets. Net loss was $52 million, compared with net income of $41.1 million last year.
The company ended the quarter with $123.9 million in cash and $400 million of outstanding principal on its term loan. Net debt to trailing 12-month adjusted EBITDA was approximately 1.2 times. Bealer said the company repurchased about 2 million shares in the quarter and has spent approximately $240 million on buybacks over the past 12 months, including approximately $213 million this fiscal year. As of July 9, the company had about $158 million remaining under its current share repurchase authorization.
Company Raises Pricing and Updates Fiscal 2026 Outlook
Scalzo said Simply Good Foods recently announced a high single-digit price increase across most of its portfolio, effective in September, to offset inflation in proteins, packaging and other key inputs. He said the action is “necessary” and “appropriate,” though “not ideal for a turnaround.”
For fiscal 2026, the company now expects net sales of $1.345 billion to $1.355 billion, representing a decline of 7% to 6%. Adjusted EBITDA is expected to be $220 million to $225 million, down 21% to 19% year-over-year. GAAP gross margins are expected to decline roughly 375 basis points.
For the fourth quarter, management expects net sales of $322 million to $332 million, down 13% to 10% from a year earlier. Bealer said the outlook assumes similar consumption trends to the third quarter and that the company will “slightly undership consumption” to enter next year with appropriately sized customer inventories.
Scalzo said the company’s turnaround priorities are strengthening business economics, improving organizational focus and discipline, and rebuilding brand investment through stronger consumer insights and marketing execution. He said he remains confident because the category is attractive, the company’s brands remain relevant and its challenges are “fixable.”
About Simply Good Foods (NASDAQ:SMPL)
Simply Good Foods Co (NASDAQ: SMPL) is a North American consumer packaged foods company specializing in better-for-you nutrition products. The company’s portfolio centers on two well-established brands, Atkins and Quest, which offer a range of low-carbohydrate, high-protein bars, powders, shakes, and snacks. Simply Good Foods aims to support consumers’ health and wellness goals by delivering convenient, nutrient-dense options without added sugars or artificial sweeteners.
Under the Atkins brand, the company produces meal replacements, snack bars, and ready-to-drink shakes designed for low-carb dieters.
