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Del Monte’s Inflates Gross Margins With Segment Cost Reclassification
Fresh food distributor shifts costs to its smallest segment to show juicer gross margins in most important segments.
November 5, 2022
Fresh Del Monte Produce (FDP), a fresh fruits and vegetable producer and distributor, is reporting higher gross profits across its two most important segments thanks to a methodology change. In its latest quarterly filing, Del Monte inserted new language revealing it has reclassified COGS between its three segments.
With little detail other than attributing the change to a “refinement” in its cost allocation methodology, the change shifts costs once allocated to the company’s two biggest segments to its much smaller “Other Products” segment.
In the latest quarter the change:
— Increased gross profit in the Fresh and value-added products by $0.7 million
— Increased gross profit in the Banana segment by $1.3 million
— Decreased gross profit in the Other products and services segment by $2.0 million
The Fresh and value-added products segment generated 56.9% of Del Monte’s revenue in the latest quarter. The Banana segment generated 36.8% of sales in the latest quarter.
Shifting costs to the company’s smallest— and least important segment— makes Del Monte’s two key segments appear healthier than they are.
Related: AMNC, SENE.A, LANC, LW, SJM
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