Release Date: August 28, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- JM Smucker Co (SJM, Financial) reported double-digit sales and earnings growth for the first quarter of fiscal 2025.
- Uncrustables sandwiches saw a 24% increase in net sales, driven by national advertising, distribution gains, and new merchandising investments.
- The Café Bustelo brand continues to perform strongly, with double-digit net sales growth in 11 of the last 12 quarters.
- The integration of Hostess Brands is progressing well, with cost synergies being realized earlier than anticipated.
- The company remains confident in achieving its long-term objective of generating at least $1 billion in free cash flow annually.
Negative Points
- The Sweet Baked Snacks segment delivered net sales below expectations, primarily due to the macro-economic environment and slowdown in the convenience channel.
- Inflationary pressures and diminished discretionary income are impacting consumer spending, particularly in the dog snacks and sweet baked goods categories.
- The coffee segment is experiencing meaningful commodity volatility and inflation, leading to price increases.
- Net interest expense increased significantly due to the senior notes issued for the Hostess Brands acquisition and increased short-term borrowings.
- The company has revised its full-year net sales expectations downward due to the dynamic consumer environment and higher green coffee costs.
Q & A Highlights
Q: Can you provide more details on the performance of the Uncrustables brand and its future outlook?
A: (Mark Smucker, CEO) Uncrustables sandwiches saw a 24% increase in net sales, driven by national advertising, distribution gains, and new merchandising investments. We are launching a new peanut butter and raspberry flavor next month and operations for our third Uncrustables facility in McCalla, Alabama, will begin in October. We anticipate continued double-digit net sales growth for the brand.
Q: How is the integration of the Hostess Brands acquisition progressing?
A: (Mark Smucker, CEO) The integration is progressing well and remains on track. We are beginning to realize synergies earlier than anticipated and expect approximately $100 million in cost synergies by the end of fiscal year 2026. However, net sales for the Sweet Baked Snacks segment were below expectations due to macroeconomic factors and a slowdown in the convenience channel.
Q: What are the key drivers behind the performance of the pet food segment?
A: (Mark Smucker, CEO) In pet food, dog snacks and cat food both contributed positive volume mix. The Milk-Bone brand saw over 60% growth in soft and chewy snacks, driven by innovation like the new Milk-Bone peanut buttery bites featuring Jif peanut butter. Meow Mix regained the number one volume share position in dry cat food, with mid-single-digit net sales and volume mix growth.
Q: Can you elaborate on the performance and future plans for the coffee segment?
A: (Mark Smucker, CEO) The Café Bustelo brand remains one of the fastest-growing brands in the mainstream one-cup and instant categories. It has delivered double-digit net sales growth in 11 of the last 12 quarters. We are expanding the brand into cold coffee with new multi-serve ready-to-drink offerings, which are off to a strong start.
Q: What are the updated financial expectations for fiscal year 2025?
A: (Tucker Marshall, CFO) We now expect full-year net sales to increase 8.5% to 9.5%, reflecting a full year of sales from the Hostess Brands acquisition. Adjusted earnings per share are anticipated to be in the range of $9.60 to $10. We project free cash flow of approximately $875 million with capital expenditures of $450 million for the year.
Q: How is the company managing cost pressures and inflationary impacts?
A: (Tucker Marshall, CFO) We are taking a second list price increase across our coffee portfolio in early October to manage higher green coffee costs. We continue to focus on operational efficiencies and disciplined cost management, which supported double-digit adjusted earnings per share growth.
Q: What are the strategic priorities for the company moving forward?
A: (Mark Smucker, CEO) Our three strategic priorities are to deliver the business, integrate and deliver on the acquired Hostess Brands business, and achieve our transformation, cost discipline, and cash generation aspirations. These priorities guide our business and position the company to deliver strong results and increase shareholder value.
Q: How is the company addressing the dynamic consumer environment?
A: (Mark Smucker, CEO) We are revising our full-year net sales expectations due to inflationary pressures and diminished discretionary income impacting the dog snacks and sweet baked goods categories. We remain focused on managing the elements we can control and taking actions that position the company for long-term success.
Q: What are the key growth opportunities for the company?
A: (Mark Smucker, CEO) We continue to prioritize resources towards our largest growth opportunities, such as Uncrustables sandwiches, Café Bustelo coffee, and the Milk-Bone and Meow Mix pet food brands. Additionally, the Hostess acquisition remains a key component to delivering on our fiscal 2025 net sales expectations.
Q: How is the company leveraging its transformation office?
A: (Mark Smucker, CEO) Our transformation office continues to drive savings across the company, including margin improvement across all of our US retail segments and in international and away-from-home. We remain confident in our long-term objective to generate at least $1 billion in free cash flow annually.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
