Avocado marketer Calavo Growers Inc., Santa Paula, Calif., posted lower-than-expected quarterly profit amid higher fruit costs, even as sales jumped 36% on strong avocado demand and an expansion into melon shipments.

Calavo’s avocado shipments surged 35% during the three months ended Jan. 31, driven by significantly larger fruit volume originating from California and Mexico, Lee Cole, the company’s chief executive officer, said March 2.

Sales trends in other diversified fresh categories “continued to edge higher,” Cole said. He previously said he expected Calavo’s avocado shipments to continue rising this year as stepped-up promotional efforts and health trends boost consumption.

Still, BB&T Capital Markets analyst Heather Jones deemed Calavo’s results disappointing, saying the company’s margins were surprisingly weak because of rising costs. Fruit costs for guacamole were up substantially because of strong total avocado demand, Jones said.

“High fruit costs are expected to continue through the remainder of the year,” she said.
“It seems that strong end-market demand may have resulted in increased competition for the fruit, which has resulted in some narrowing of spreads in Mexico.”

Jones lowered her 2011 profit forecast for Calavo to $1.08 a share from $1.40. Calavo earned $1.22 in 2010.

Avocados have grown increasingly popular as a sandwich and salad ingredient and in vegetarian cuisine.

During the three months ending Jan. 31, Calavo’s fiscal 2011 first quarter, net income was $2.31 million, up 1.8% from $2.27 million for the same period a year earlier, the company reported. Sales during the quarter totaled $91.3 million, up from $67.3 million.

Calavo’s sales rise, but profit disappoints