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TreeHouse Foods (THS), a manufacturer of private label snacks and beverages, is building upon its recent efforts to improve margins and profitability, announcing organizational changes that include the departure of its EVP, Business President and Chief Commercial Officer, and the elimination of approximately 150 roles. The company also issued upside Q1 guidance for revenue of at least $792 mln and reaffirmed its FY25 adjusted revenue and adjusted EBITDA outlook, reflecting the resiliency in the private label category and the positive effects from improving its supply chain and prioritizing gross profit dollars through margin management.

• Rewinding to THS's Q4 earnings report in mid-February, in which the company handily beat EPS estimates on nearly flat sales, the impact of its strategy to focus on margins and gross profit dollars was already evident. Gross profit margin expanded by 2.8 percentage points to 19.5%, mainly due to supply chain initiatives, reduced commodity costs, and operational efficiencies. Additionally, THS reduced its capital expenditures by 22% yr/yr to $28.7 mln in 4Q24.
• With today's announcement, THS is taking another step forward in this strategy, specifically targeting corporate overhead reductions, leadership restructuring, and additional cost efficiencies. Once completed, the restructuring is expected to enhance decision-making speed while simplifying the organizational structure. 
• In today's press release, THS also sought to ease investors' concerns surrounding tariffs, noting that only 5% of its sales come from customers outside of the U.S., with almost all of those sales occurring in Canada. The limited exposure to tariffs and modest international footprint minimizes risks associated with trade-related disruptions and additional costs from tariffs on imported goods. The downside is that the limited international exposure constrains its sales growth opportunities.
• In terms of the bigger picture, THS's organizational changes should position it to better capitalize on rising consumer demand for private label products. The affordability and improved quality of private label food brands make them ideally suited to perform well during economic downturns. In fact, reports show that 53% of consumers now prefer private label products, citing affordability and comparable quality to branded options.

THS's strategy to prioritize margins and gross profit reached a higher gear with today's announced organizational changes. These efforts, which are already paying dividends, as illustrated by THS's blowout Q4 EPS result, will help the company navigate through an increasingly challenging macro backdrop.