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 strong first-quarter results with growth in both volume and sales, as well as earnings per share.
- Uncrustables continues to show significant growth, contributing positively to the company's performance.
- The company has successfully increased pricing within its coffee portfolio to offset rising green coffee costs.
- Milk-Bone dog snacks showed modest growth, supported by new product launches like the soft and chewy peanut buttery bites co-branded with Jif.
- The integration of Hostess is on track, with synergies coming in better than expected, supporting the overall profit profile.
Negative Points
- JM Smucker Co (SJM) has moderated its full-year 2025 comparable sales growth outlook by about a point due to inflation impacting discretionary spending on sweet baked goods and dog snacks.
- The convenience channel saw a decline in consumer shopping frequency, affecting the sweet baked snacks business.
- The company has reduced its marketing spend slightly, which could impact brand support and growth initiatives.
- Hostess is now expected to be dilutive to EPS by $0.05 to $0.10, contrary to initial expectations of slight accretion.
- The coffee segment faces challenges due to competitive dynamics, particularly affecting the Dunkin' brand.
Q & A Highlights
Q: Can you talk about the shift in consumer behavior impacting your sweet baked goods and dog snacks categories?
A: We observed an acceleration in consumers shopping less frequently in convenience stores, impacting our sweet baked snacks and pet snacks. This shift is driven by reduced discretionary income, leading to more cautious spending.
Q: How do you see volume and pricing contributing to your revised 1% full-year comparable sales growth outlook?
A: We expect 2.5% net sales growth, with 50 basis points from volume mix and two points from pricing. The increase in pricing is largely due to another round of pricing within our coffee portfolio due to ongoing green coffee cost increases.
Q: How is the reduction in the top-line outlook affecting your expectations for Hostess?
A: The reduction is partly due to softness in the sweet baked snacks category and convenience channel. Despite this, we are seeing synergies come in better than expected, supporting the overall profit profile of the business.
Q: Given the tougher consumer environment, is there a risk of further cuts to your guidance?
A: We have acknowledged near-term headwinds and de-risked the back half of the fiscal year. We remain confident in our portfolio, with ongoing momentum in key areas like Uncrustables and Cafè Bustelo.
Q: What are your growth expectations for Uncrustables this year and in subsequent years?
A: We continue to see tremendous runway for Uncrustables, aiming for $1 billion in sales by fiscal year 2026. We are bringing on additional capacity and launching new flavors to support this growth.
Q: How are you approaching additional price increases in the coffee category?
A: We are taking a holistic approach, applying price increases across the entire portfolio, including roast and ground, single-serve, and all brands. We have modeled elasticity and feel reasonably good about our projections.
Q: What actions are you taking to address the softness in the sweet baked goods category?
A: We are focusing on expanding distribution, innovating, and increasing marketing spend, particularly in the back half of the year. We also see no meaningful impact from GLP-1 drugs on this category.
Q: How are you managing the profitability of your pet portfolio given the recent strong performance?
A: The strong profitability is supported by positive volume mix, cost and productivity savings, and initial steps to remove stranded overhead. We expect to maintain a 25% margin range, with potential for improvement as we move forward.
Q: How are retailers reacting to the consumer pressure on dog treats?
A: We have not seen any meaningful inventory reduction from retailers. The slowdown is primarily due to less frequent purchases driven by lower discretionary income.
Q: What gives you confidence in turning around Hostess despite the current challenges?
A: We believe in the strength of the sweet baked goods category and the Hostess brand. We are focusing on stabilizing the convenience channel, improving merchandising and distribution, and leveraging synergies from the acquisition.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
