Simply Good Foods Stock Tumbles as Weak Outlook Sparks Sell-Off
Shares plunge after the company reaffirms a grim forecast for declining margins and stagnant sales, amplifying concerns over its struggling Atkins brand.
Shares of The Simply Good Foods Company (NASDAQ: SMPL) plunged in trading on Thursday after the company’s fiscal first-quarter earnings report revealed a business grappling with shrinking profitability and a deepening decline in its legacy Atkins brand.
While the company posted quarterly revenue and earnings that were narrowly ahead of analyst estimates, investors looked past the minor beat and focused on a reaffirmed forecast for a challenging year ahead. The bleak outlook, which projects stagnant sales and eroding margins, sent the stock tumbling more than 19% in morning trading, putting it on pace for one of its worst single-day performances and pushing the share price near a 52-week low.
For the first quarter of fiscal 2026, Simply Good Foods reported adjusted earnings of $0.39 per share on revenue of $340.2 million. This was just ahead of the consensus estimate of $0.36 per share and $339.3 million in revenue. However, the positive news ended there. According to the company's official filing, the underlying financial health showed signs of significant decay. Net income fell a staggering 33.7% year-over-year to $25.3 million, while adjusted EBITDA dropped 20.6% to $55.6 million.
A key driver of the profit collapse was a severe contraction in profitability. The company’s gross margin fell by 590 basis points compared to the same period last year, a direct hit from higher input costs and a competitive marketplace that is limiting pricing power.
The most acute concern for investors is the accelerating decay of the Atkins brand, a foundational part of the company's portfolio. Sales for the brand, once a leader in the low-carb nutrition space, plummeted 16.5% in the quarter. This represents a significant worsening of a negative trend, creating a major headwind for the company's overall growth.
In the report, management reaffirmed its full-year fiscal 2026 guidance, which includes a net sales forecast ranging from a 2% decline to a 2% increase and a further gross margin decline of 100 to 150 basis points. This guidance was described as "surprisingly weak" and "underwhelming" by some market observers. Analysts highlighted the company's predicament, with one issuing a "sell" rating following the report, citing "mounting risks" even within a favorable health food category.
The results expose the company’s heavy reliance on its Quest brand to generate growth while its other major brands face significant challenges. With Atkins in a steep decline and the recently acquired OWYN brand facing what analysts call "integration challenges," the pressure on Quest to carry the entire company is immense.
Wall Street's harsh reaction signals waning confidence in the company's strategy. Before the report, the consensus rating among analysts was a neutral "Hold," with an average price target of over $29.00. The post-earnings sell-off suggests a rapid re-evaluation of the company's prospects as it navigates a commoditized market where private-label competition and shifting consumer tastes are compressing margins and punishing brands that fail to innovate.