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SJ

SANFILIPPO JOHN B & SON INC (JBSS)·Q3 2024 Earnings Summary

Executive Summary

  • Q3 FY2024 net sales were $271.9M (+14.0% YoY), driven by ~$46.9M from the Lakeville snack bar acquisition; diluted EPS was $1.15 (-14.8% YoY) as gross margin compressed to 18.1% from 20.9% YoY .
  • Sequentially, results softened versus Q2: net sales fell to $271.9M from $291.2M and diluted EPS to $1.15 from $1.64 as higher peanut and walnut costs, lower production volume, and repairs/maintenance weighed on margins .
  • Management expects Lakeville to be accretive to operating income in Q4 FY2024 and cut FY dilution from $0.80–$1.00 to $0.25–$0.50 per share, reflecting faster operational optimization .
  • Board approved a $1.00 per share special cash dividend, payable June 20, 2024 (record date May 31, 2024), reinforcing capital return while integration progresses .
  • Wall Street consensus estimates from S&P Global for Q3 were unavailable at time of report due to API limits; estimate comparisons are therefore not included.

What Went Well and What Went Wrong

What Went Well

  • Lakeville integration ahead of plan; accretive expected in Q4. “We currently expect it to become accretive to our operating income during the upcoming fourth quarter, which is significantly ahead of our initial schedule” . FY dilution updated to $0.25–$0.50 per share from $0.80–$1.00 .
  • Strong consumer channel and private brand recovery excluding Lakeville; e-commerce momentum for branded products helped offset distribution losses .
  • Nine-month diluted EPS increased 3.9% to $4.30, and gross margin for the nine months rose slightly to 20.6% despite category headwinds, reflecting cost discipline and operational improvements .

What Went Wrong

  • Gross margin contracted to 18.1% (from 20.9% YoY), pressured by Lakeville’s higher net sales base mix, higher commodity costs for peanuts and walnuts, reduced production volume, repairs/maintenance, noncompliant inventory, and higher incentive comp .
  • Branded volume fell 5.8% YoY in Q3, with Fisher snack nuts down 15.8% due to lost mass retailer distribution and softness at grocery; Southern Style Nuts saw declines tied to prior club channel losses .
  • Contract packaging volumes declined 11.3% YoY on cashew and mixed nut distribution cuts by a major customer amid soft consumer demand .

Financial Results

MetricQ3 2023Q1 2024Q2 2024Q3 2024
Net Sales ($USD Millions)$238.5 $234.1 $291.2 $271.9
Gross Profit ($USD Millions)$49.8 $57.0 $57.9 $49.2
Gross Margin (%)20.9% 24.4% 19.9% 18.1%
Operating Income ($USD Millions)$21.8 $24.6 $27.6 $18.4
Net Income ($USD Millions)$15.7 $17.6 $19.2 $13.5
Diluted EPS ($)$1.35 $1.51 $1.64 $1.15
Operating Expenses (% of Net Sales)11.7% 13.9% 10.4% 11.3%

Segment/channel sales volume trends (YoY % change each quarter):

ChannelQ1 2024Q2 2024Q3 2024
Consumer Distribution-5.8% +15.3% (−2.8% excl Lakeville) +33.1% (+0.3% excl Lakeville)
Private Brand-5.0% +20.2% (−2.3% excl Lakeville) +38.6% (+0.5% excl Lakeville)
Branded-17.0% -10.5% -5.8%
Commercial Ingredients-5.5% +6.5% (+2.8% excl Lakeville) -2.4% (−3.0% excl Lakeville)
Contract Packaging-19.4% -8.6% -11.3%

Key KPIs:

KPIQ3 2023Q1 2024Q2 2024Q3 2024
Weighted avg selling price per lb (YoY change)N/AUp 1.4% in category pricing context −1.7% company avg −4.3% company avg
Inventory ($USD Millions, quarter-end)$190.4 $174.8 $197.3 $210.7
Raw input cost per lb (YoY change, excl Lakeville)N/A−2.6% −9.8% −11.7%
Interest Expense ($USD Millions)$0.6 $0.2 $1.1 $0.8

Notes:

  • Q3 gross profit benefited ~$3.0M from Lakeville; ~$1.7M from partial release of acquisition inventory reserve .
  • Lakeville contributed ~$46.9M to net sales in Q3 .

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Lakeville EPS dilutionFY2024$0.80–$1.00 per diluted share $0.25–$0.50 per diluted share Raised (lower dilution)
Lakeville operating income accretionQ4 FY2024Later than Q4 accretion implied initially Accretive to operating income expected in Q4 FY2024 Pulled forward
Special cash dividendPay 6/20/2024; record 5/31/2024None$1.00 per share New capital return

No formal revenue, margin, OpEx, OI&E, or tax rate guidance was provided in Q3 materials .

Earnings Call Themes & Trends

TopicPrevious Mentions (Q2 & Q1)Current Period (Q3)Trend
Consumer demand & pricingElevated shelf prices; consumers shifting to value channels; snack aisle volume declines; nut/trail mix prices near 5-year highs Continued elevated retail prices; cautious consumers; company testing price elasticities and seeing initial success with a major retailer Stabilizing prices, demand still soft; active price optimization
Private label snack barsPrivate label bars up in dollars/pounds; expanding distribution (Q2) Lakeville added $46.9M sales; private brand volumes up 38.6%; internal bars ~$3.2M; private label bars growing in syndicated data Strong momentum; integration ahead of plan
Branded portfolioFisher snack declines due to mass channel loss; OVH rebrand mixed; Southern Style impacted by club losses (Q1/Q2) Branded −5.8%; Fisher snack −15.8%; OVH mixed; working on pricing/pack architecture Ongoing pressures; targeted remediation
Competitive dynamicsPlanters aggressive pricing impacting private label and branded (Q1) Competitive pricing pressure noted in commercial channel; broader category softness Competition remains intense
Cost environmentLower tree-nut acquisition costs; higher peanuts; improved manufacturing efficiencies (Q1/Q2) Higher acquisition costs for peanuts/walnuts; reduced production volume; repairs/maintenance increased Mixed: peanut/walnut cost pressure offsets earlier tailwinds
Capital returns—$1.00 special dividend approved Positive shareholder return signal

Management Commentary

  • “We currently expect [Lakeville] to become accretive to our operating income during the upcoming fourth quarter, which is significantly ahead of our initial schedule.” — Jeffrey T. Sanfilippo, CEO .
  • “We initially estimated the current fiscal year dilution due to the Lakeville Acquisition to range from $0.80 to $1.00 per diluted share, which we have updated to $0.25 to $0.50 per diluted share as a direct result of our team’s excellence…” — CEO .
  • “Even though we continue to operate in an environment of elevated retail selling prices and cautious consumers, our consumer distribution channel delivered strong results… we continue to see strong momentum at a major e-commerce customer for our branded products.” — CEO .
  • “Third quarter gross profit margin… decreased to 18.1%… Excluding Lakeville, gross profit margin decreased slightly by 30 basis points due to higher commodity acquisition costs for peanuts and walnuts, reduced production volume and increased expenditures…” — CFO .

Q&A Highlights

  • The Q3 FY2024 transcript segment accessible contained prepared remarks; Q&A retrieval was not available due to document system limitations . Key themes addressed in management’s remarks included pricing elasticity testing at a major retailer, branded portfolio actions, and accelerated Lakeville accretion expectations .
  • For context, prior-quarter Q&A touched on sustainable operating profit per pound trends and competitive promotional shifts in the category (Q2) , and Planters’ aggressive pricing affecting private label and branded dynamics (Q1) .

Estimates Context

  • S&P Global consensus EPS and revenue estimates for Q3 FY2024 were unavailable at the time of this analysis due to API request limits, so comparisons to estimates are not included. Analysts may revisit forward estimates given management’s updated Lakeville accretion timeline and reduced FY dilution, which could support upward adjustments to Q4 operating income and FY EPS trajectory .

Key Takeaways for Investors

  • Mix shift from Lakeville boosted sales but compressed margins; accretion expected in Q4 could flip the narrative if operational improvements sustain .
  • Private label bars provide a durable growth vector; early internal bar sales and Lakeville capacity broaden JBSS’s category exposure beyond nuts/trail mix .
  • Branded softness remains the swing factor; regaining mass distribution and optimizing price/pack architecture will be critical to stabilizing Fisher and OVH trends .
  • Cost environment mixed: lower tree-nut costs earlier now offset by peanut/walnut pressures; watch commodity cycles and production volumes for margin recovery .
  • Balance sheet supports flexibility; inventory levels increased with Lakeville; interest expense rising modestly with higher debt levels tied to acquisition .
  • Capital return continues with $1.00 special dividend; potential catalyst for stock reaction alongside Q4 Lakeville accretion .
  • Near-term trading: sentiment likely hinges on evidence of margin stabilization and confirmation of Q4 accretion; medium-term thesis: diversified bar platform plus private label momentum can offset branded headwinds if execution persists .