Prepared remarks
Ladies and gentlemen, welcome to the Nomad Foods First Quarter 2026 Earnings Q&A Session. Please note this conference is being recorded. I would now like to turn the call over to your host, Jason English, Head of Investor Relations. Thank you. You may begin.
Hello. Good morning, folks, and welcome to Nomad Foods First Quarter 2026 Earnings question-and-answer session. We've posted the associated press release, prepared remarks and investor presentation on Nomad Foods' website at nomadfoods.com. I hope you've all had a chance to review them. I'm Jason English, Head of Investor Relations and Corporate Strategy, and I'm joined by Dominic Brisby, our CEO; and Ruben Baldew, our CFO. During this call, we will make forward-looking statements about performance that are based on our view of the company's prospects, expectations and intentions at this time. Actual results may differ due to risks and uncertainties, which are discussed in our press release, our filings with the SEC and in our investor presentation, which includes cautionary language. We will also discuss non-IFRS financial measures during this call today. These non-IFRS financial measures should not be considered a replacement for and should be read together with IFRS results.
Users can find the IFRS to non-IFRS reconciliations within our earnings release and in the appendices at the end of the slide presentation available on our website. Please note that certain financial information within this presentation represents adjusted figures. All adjusted figures have been adjusted primarily for, when applicable, share-based payment expenses and related employer payroll taxes, exceptional items, foreign currency translation charges, gains on hedges and hedge ineffectiveness. Unless otherwise noted, comments from here will refer to those adjusted numbers. With that, Ryan, back to you. Let's open the line to questions.
Questions and answers
We take the first question from the line of Scott Marks from Jefferies.
I wanted to start just to ask about the quarter itself. It seems like some of the disruption tied to price negotiations came in a little bit better than feared. I know you called out some strong growth in markets outside of the U.K., France and Germany. So just wondering if you could help us understand to what you attribute the better performance? And how should we be thinking about that level of potential disruption for Q2 and beyond?
Thank you for the question. This is Dominic. The quarter did come in slightly better than we were expecting in terms of category growth. It came in at 3.8%, which was stronger than we'd expected. As a result, our top-line performance was slightly better than we'd been planning for and drove upside through the P&L. Going forward, we continue to anchor to a category growth of roughly 2%, which is consistent with what we saw last year. We're encouraged by our strength year-to-date. But as I mentioned in the prepared remarks, some of that is likely due to various factors such as an earlier Easter this year, some A&P phasing and so on. And of course, the broader economic and consumer backdrop remains pretty dynamic. So we don't believe now is the right time to start embedding more optimistic planning assumptions. If you look in terms of what's been happening with retailers, we told you last quarter that we were planning for some disruptions as we implemented our price increases given that this is a fairly normal occurrence in many European markets.
Those planning assumptions that we made ended up being prudent as we did experience some disruptions, primarily in France and Germany. They weighed on both our sell-in and, more recently, our sell-out performance. A couple of retailers temporarily suspended orders for some of our products and canceled some promotions. This, combined with low promotions, resulted in some out-of-stocks and negatively impacted our market share in March, which also continued through April, weighing on shipments in that month. You will also see that in Nielsen when the next batch of Nielsen data is released. The good news is that those issues are now behind us and were already anticipated in our full-year guidance. We've now secured our planned pricing. Our shelves are being restocked, and we have robust promotional plans in all our markets for the remainder of the year.
Understood. I appreciate the context there. Maybe next one, you made a comment in your prepared remarks about previously operating with a more narrow portfolio focus, but now kind of removing some of those obstacles. Wondering if you can share a bit more context about this strategy and what exactly you mean by that?
We'll be much more expansive on precisely what that means and when we have our Analyst and Investor Day in the fall. To give you a rough view of where our thinking is heading, previously Nomad had quite a strong focus on products that in one way or another could be described as healthy, and some of those worked very well. However, we consider our ability to be a real champion of frozen food. Of course, some frozen food is very healthy, but as part of a balanced diet, you may choose to have the occasional treat or product that is less healthy. So we're going to give ourselves more flexibility to do what is commercially successful rather than simply driving a health agenda. We'll give you much more detail later in the year.
Understood. And then maybe if I could just squeeze in one more. Obviously, there's been a lot of volatility, especially around energy costs and inflationary pressures tied to the Middle East conflict. Wondering if you can just help us understand how you see that impacting your business, whether for this year or beyond.
Very happy to cover that. We look at the situation in the Middle East through three lenses: supply chain disruptions, impact on consumer demand, and cost inflation. First, supply chain: we've seen no impact on our business. Our products are produced locally, and while our procurement is geographically diverse, none of it has been adversely affected so far. Second, consumer demand: we're watching the situation closely, but we have not yet seen any evidence of consumer demand for our categories being impacted. In fact, growth has been greater than we anticipated in both volume and value. Our categories deliver strong value for money, which historically has made us relatively insulated from economic volatility versus some other food companies. Third, cost inflation: fuel, fertilizer and resin costs have moved higher and the situation is fluid. As of today, our direct and indirect exposure to these costs is manageable, and we've got good coverage through most of 2026.
As a result, our overall COGS inflation rate for this year has picked up by less than 1% and remains within our mid-single-digit outlook. However, we do expect incremental inflation to start to roll through our P&L in the fourth quarter and into fiscal 2027 if current conditions persist. That said, as we're demonstrating this year, we have the ability to pull various price levers and revenue growth management levers to manage commodity cost inflation. We also have a robust productivity pipeline that will generate substantial cost savings next year. So, although the situation is fluid, we see it as an eminently manageable situation for Nomad.
We take the next question from the line of John Baumgartner from Mizuho Securities.
Maybe first off, thinking through the downside risks to 2026. I'm wondering if you can speak to expectations for the Adriatics here in Q2 and Q3, given some of the more local economic disruptions in that area? And then, thinking about the U.K. and Europe more broadly, Ruben, I think during past periods of economic dislocation we've actually seen that benefit frozen food demand. With your pricing in place now and where you're seeing price gaps, how are you thinking generally about the competitive environment this year? Do you anticipate other branded competitors being able to raise prices following you? Just broader thoughts on consumer-sensitive pricing here.
Ruben, do you want to handle Adriatic and I'll take private label?
Yes, sure. In Adriatic, at this moment we're not seeing macroeconomic or geopolitical issues hampering our business. Execution and results are fully in line with our plan. Regarding our full-year guidance and the step-up we expect in H2 in terms of profitability, one of the elements is that in H2 and especially in Q3 we expect a positive margin mix. Last year the summer was slightly disappointing; now we're not planning for an excellent summer, but all else equal and normal, we do expect Adriatics to deliver value for us in Q3 thanks to improved sell-out and sell-in of our out-of-home ice cream business.
On private label, it's early days and a lot of our price increases have only just hit shelves or are just beginning to hit shelves. In certain markets we've begun to see private label move already; in others, we're still waiting to see what happens. We've embedded the risk of delays in our guidance. The likelihood, when you look at it in depth, is that private label players are experiencing as much if not more cost inflation than we are. For example, in fish, many private label producers source double-frozen fish from China, and the cost of that has risen more than other sources of fish. So we tend to believe it's a question of when and not if they will raise prices.
Okay. And then I'm curious, Dominic, as you dig deeper into the business, and I know you're making changes to marketing, and I think there's been some discussion as well about improving joint business plans and some of the point-of-sale engagement. How do retailers look at this category, frozen food right now? It feels that some retailers focus more on the fresh business. When you think about frozen and engagement, to what extent are you seeing the balance of benefits for you being multi-category exposure versus certain categories that stand out where you can drill deeper? How are you thinking about those joint business plans with retailers from here?
It's still early days, but in all discussions we've been having with retailers, we're seeing a great appetite from them to work more closely with us as the clear leader in frozen food in Europe on how to grow the category. Historically, some of our relations with retailers were a little transactional, whereas what we need to do is work with retailers on how to grow the category with them. We've made new appointments and consciously chosen people who are very good at this and have a clear track record. For example, in the U.K., our biggest market, the person we put in as President of the U.K., reporting directly to me, Simon Ball, has spent most of his life in food in the U.K. on both the manufacturer and retailer sides. He has a deeper understanding of how retailers think, what they want and how they operate. We're seeing strong desire from retailers to work with us, and early indications are positive. Even without the full force of Nomad's capabilities, the category is still growing by itself, so retailers are pretty excited.
We take the next question from the line of John Tanwanteng from CJS Securities.
Nice job on the quarter. I was wondering if you could talk about trends in Q2 so far, what you're seeing from a consumer perspective? And then on top of that, when would you expect your sell-in to start to track the sell-out and how that progresses through the year?
Maybe I'll answer that and start with the macro link to what Dominic said on consumer trends. We see a healthy category year-to-date: 3.8% growth, with volume growth of plus 1.5%. That is strong. We're monitoring potential uncertainty from inflation and geopolitics, but at this moment we don't have any data suggesting consumers are trading down or that the category will decrease. Zooming into our numbers, both sell-in and sell-out: we have executed and implemented the price increases in line with our plan and guidance. However, as is normal in certain regions, we did see disruptions, and that disruption flows into Q2, specifically in April. The good thing is we have now closed our negotiations, so from May we see shipments fully back on. But that will weigh on the quarter itself and could be a couple of basis points. Regarding Easter, we saw a bit of shipments impact but not that big — it could be around 0.5%. Those are the trends for us. Another big point reflected in our guidance is generic inflation; for example, in fish we see quite a bit of inflation. It's not a matter of if private label will follow, but when. What we've seen in the past is often a time lag. With our price increases, consumer prices will go up at the retailer's discretion. We expect private label to follow, but there will be a time lag and that elasticity impact will weigh in Q2.
Got it. And I have a follow-up, if I could. I was wondering if you could talk a little more about the risk in your supply chain from inflation and financial pressure. I understand that you secure a lot of your costs ahead of time, but I'm just wondering if you thought about yields or material financial constraints and how those might flow through and if there's a risk to your ability to secure supply even if you have contracts in place.
We've looked in depth at our contracts and which contracts can reopen. Much of our commodity spend is linked to agricultural livestock and fish, which is more linked to seasonality than to input costs, so we see a bit less exposure there. The bigger question for us and many companies is the indirect impact: how could this flow into 2027 with the cost of fertilizers, petrol and fuel, and potential labor inflation and how that will translate into the cost price of our products in 2027. We're monitoring that, but it's too early and too fluid to give specific numbers. We do expect it to be elevated versus what we're seeing in 2026.
Ryan, we think we lost you. You still there?
Am I audible, sir? As there are no further questions from the participants, I now hand the conference over to Dominic Brisby for his closing comments.
Thank you all for joining us today and for your interest in Nomad Foods. I look forward to speaking with many of you in the days and weeks ahead and to seeing many of you at our Analyst Day this fall. Thank you.
Thank you. Ladies and gentlemen, the Nomad Foods conference has now concluded. Thank you for your participation. You may now disconnect your lines.