Release Date: November 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- JM Smucker Co (SJM, Financial) delivered a strong second quarter with solid top-line momentum.
- The company is committed to achieving $100 million in cost synergies by the end of fiscal year 2026.
- Uncrustables brand is performing exceptionally well, with expectations to hit $900 million in sales this year.
- The company is actively engaged with key customers to improve distribution and merchandising for Sweet Baked Snacks.
- Meow Mix brand continues to be a bright spot in the pet portfolio, with restored promotional activity and innovation driving growth.
Negative Points
- JM Smucker Co (SJM) expects flat year-over-year sales in the fiscal third quarter due to challenges in the coffee and pet portfolios.
- Hostess brand is experiencing a low single-digit year-over-year decline in the second half, with execution issues impacting performance.
- The company faces ongoing green coffee inflation, which has necessitated two rounds of pricing increases.
- There is a $0.60 impact of stranded overhead from the pet food divestiture affecting this fiscal year's earnings.
- The discretionary nature of pet treating is causing slower growth in the Milk-Bone brand.
Q & A Highlights
Q: Mark, you now expect flat year-over-year sales in your fiscal third quarter. Is there something discrete impacting third quarter sales?
A: Tucker Marshall, Chief Financial Officer: We anticipate flat coffee sales due to the second round of pricing within our coffee portfolio. Additionally, the pet portfolio is lapping a strong comp from the prior year, and we're seeing reduced co-manufacturing sales. However, growth in our frozen handheld and spreads portfolio is expected to offset these factors.
Q: Can you update us on synergies related to Hostess, both this year and next?
A: Tucker Marshall, Chief Financial Officer: We are committed to achieving $100 million in cost synergies by the end of fiscal year '26, with half expected this fiscal year and half next. Mark Smucker, CEO, added that they are focusing on improving execution, expanding distribution, and launching a new marketing campaign to drive revenue synergies.
Q: How should we think about the balance between price versus volume/mix for the rest of the year?
A: Tucker Marshall, Chief Financial Officer: At the midpoint of our guidance range, comparable growth is around 1.5%, with the base business contributing about 2.5% to 3%. This is equally split between volume/mix and price on a full-year basis.
Q: Can you provide more details on the execution issues with Hostess and how you plan to address them?
A: Mark Smucker, CEO: We need to improve our display execution as Hostess is an impulse category. We are ramping up efforts across channels, supporting with innovation, and co-promoting Hostess with legacy brands. Despite consumer cautiousness, we remain confident in the brand due to positive snacking trends.
Q: What are your expectations for coffee sales in the second half, given recent pricing actions?
A: Tucker Marshall, Chief Financial Officer: We expect flat coffee sales in the third quarter but anticipate growth in the fourth quarter. The second round of pricing was implemented in mid-October, and we will monitor its impact on price elasticity of demand.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
