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    J M Smucker Co (SJM)

    Business Description

    The J. M. Smucker Company, commonly known as Smucker's, is a leading manufacturer and marketer of branded food and beverage products. The company operates primarily in North America, focusing on retail outlets with a diverse portfolio that includes coffee, peanut butter, fruit spreads, frozen handheld products, sweet baked goods, dog snacks, and cat food . Notable brands under its umbrella include Folgers, Dunkin', Café Bustelo, Jif, Smucker's Uncrustables, Hostess, Voortman, Milk-Bone, and Meow Mix . The acquisition of Hostess Brands in 2023 significantly bolstered its presence in the sweet baked goods category . The company relies heavily on major retail partners, with Walmart Inc. and subsidiaries accounting for a substantial portion of its net sales .

    1. U.S. Retail Coffee - Manufactures and markets popular coffee brands such as Folgers, Dunkin', and Café Bustelo, catering to a wide range of coffee preferences.
    2. U.S. Retail Pet Foods - Offers a variety of pet food products, including dog snacks and cat food, under well-known brands like Milk-Bone and Meow Mix.
    3. U.S. Retail Frozen Handheld and Spreads - Produces and sells frozen handheld products and spreads, featuring brands like Jif and Smucker's Uncrustables.
    4. Sweet Baked Snacks - Engages in the production and sale of sweet baked goods, significantly enhanced by the acquisition of Hostess Brands, with products like Hostess and Voortman.

    Q2 2025 Summary

    Initial Price$117.71July 29, 2024
    Final Price$113.79October 29, 2024
    Price Change$-3.92
    % Change-3.33%

    What went well

    • Uncrustables sales are exceeding expectations, with the company expecting to hit $900 million in sales this year, ahead of plans, and aiming to meet or exceed $1 billion by 2026.
    • The company anticipates $100 million in cost synergies from the Hostess acquisition by fiscal year 2026, with efforts to improve execution, expand distribution, launch new marketing campaigns, and drive innovation, positioning the brand for growth.
    • Meow Mix continues to be a bright spot in the pet portfolio, with restored promotional activity and ongoing innovation driving performance.

    What went wrong

    • Weakened execution in the Hostess business, specifically in securing display and promotional activities, may hinder growth in the indulgent snacking category, especially as consumers become more health-conscious.
    • Increasing usage of GLP-1 weight loss drugs among U.S. adults could reduce demand for indulgent snacks like Hostess products, particularly if coverage expands under Medicare and Medicaid, posing a potential risk to future sales.
    • The anticipated $0.25 impact to earnings from the divestiture of Voortman, with a $0.10 hit expected in the current fiscal year, suggests potential challenges in maintaining profitability.

    Q&A Summary

    1. Hostess Performance and Outlook
      Q: Hostess sales guidance implies declines; what's expected to drive improvement?
      A: Sales guidance implies a low single-digit year-over-year decline in the second half. Sequential improvement is expected due to enhanced execution efforts and lapping easier comparables. Focus areas include improving display execution, expanding distribution, launching new marketing campaigns, packaging refresh, innovation with value offerings like $1 packs, and co-promotions with legacy brands such as coffee ,.

    2. Coffee Inflation Impact
      Q: How is rising coffee inflation affecting pricing and margins?
      A: Coffee is experiencing significant inflation, with Arabica prices hitting $3, the highest in over 10 years. The market is speculative, but they intend to responsibly pass along cost changes. Coffee margins are expected to decline from 28% in the first half to the mid-20s to low 20s in the second half due to higher costs ,.

    3. EPS Guidance and Outlook
      Q: Why has EPS guidance changed, and what's the outlook?
      A: EPS guidance was revised from $10 to $9.80 due to a reduction in top-line outlook and ongoing green coffee inflation. It has now been raised to $9.90 by locking in the gross margin beat from Q2. While it's early to discuss fiscal '26 specifics, factors influencing future earnings include base business momentum, cost synergy realization, and debt paydown benefits.

    4. Pet Food Segment Outlook
      Q: What's driving pet food performance and expectations?
      A: Milk-Bone continues to perform due to its broad value spectrum and successful innovation like peanut buttery bites containing Jif. Growth is slower due to the discretionary nature of pet treating. No additional softness is expected; however, Q3 outlook is impacted by strong prior-year comps and reduced co-manufacturing sales ,.

    5. GLP-1 Weight Loss Drugs Impact
      Q: How are GLP-1 weight loss drugs affecting the business?
      A: Currently, there is no material impact on the business from GLP-1 trends. The company continues to monitor the situation and focuses on consumer needs with potential innovations like portion size adjustments and sugar reduction.

    6. Uncrustables Growth Outlook
      Q: What's driving Uncrustables growth, and what's the outlook?
      A: Uncrustables is performing exceptionally well, expected to hit $900 million this year, ahead of expectations. Being in demand-generating mode allows for advertising and new product launches, including a limited peanut butter-only SKU. Confident in meeting or exceeding $1 billion in fiscal '26.

    7. Synergies from Hostess Acquisition
      Q: What's the update on cost synergies from the Hostess acquisition?
      A: Committed to achieving $100 million in cost synergies by the end of fiscal year '26. Expect about half this fiscal year and half next fiscal year, even after the Voortman divestiture.

    8. Voortman Divestiture Impact
      Q: How will the Voortman divestiture affect earnings?
      A: The full-year impact is $0.25; impact to this fiscal year is $0.10. Plan to use $300 million in proceeds to pay down debt, partially offsetting the impact and leaving about a $0.05 effect, which is immaterial to overall guidance.

    9. Stranded Overhead Costs from Pet Divestiture
      Q: How are stranded overhead costs from pet divestiture being addressed?
      A: Completed the Transition Services Agreement; this fiscal year's impact is $0.60. Working to mitigate or remove stranded overheads; it should not be a drag on earnings next fiscal year and may become a tailwind.

    10. Balance Between Price and Volume Mix
      Q: What's the outlook on price vs. volume mix for the rest of the year?
      A: Base business growth is about 2.5% to 3%, equally split between volume/mix and price on a full-year basis.

    11. Q3 Sales Expectations
      Q: Why is Q3 sales expected to be flat year-over-year?
      A: Anticipating flat coffee sales due to a second round of pricing. Pet portfolio is lapping a strong prior-year comp and assessing the discretionary nature of pet treating, along with reduced co-manufacturing sales. Sweet Baked Snacks sales are called down, offset by growth in frozen handheld and spreads portfolio.

    12. Milk-Bone and Meow Mix Performance
      Q: How are Milk-Bone and Meow Mix performing amid competition?
      A: Milk-Bone continues to perform, leveraging its value spectrum and successful innovation. Meow Mix is a bright spot; promotional activity was restored as they returned to full supply and back in stock.

    13. Profitability and Segment Margins
      Q: How are segment margins expected to play out?
      A: Coffee margins are expected to decline to the mid-20s to low 20s in the second half due to green coffee inflation. Pet margins are higher than originally thought, balancing out overall profitability among segments.

    14. Sweet Baked Snacks and Execution
      Q: What aspects of execution weakened in Sweet Baked Snacks, and how are you addressing it?
      A: Needed to improve execution on display and support with innovation ,. Actively engaged with key customers; discussions are positive. Focused on enhancing display, expanding distribution, launching new marketing campaigns, packaging refresh, and introducing value offerings like $1 packs ,.

    Key Metrics

    View all financials →

    Executive Team

    NamePositionStart DateShort Bio
    Mark T. SmuckerChair of the Board, President, and CEOAugust 2022Mark T. Smucker has been with the company for over 26 years, serving in various roles, including President and CEO from May 2016 through August 2022. He has been a director since 2009 .
    Tucker H. MarshallChief Financial OfficerMay 2020Tucker H. Marshall joined Smucker in July 2012 and has held finance roles of increasing responsibility. Before Smucker, he was Vice President at The Reserve Group and an Associate at Bank of America Merrill Lynch .
    John P. BraseChief Operating OfficerApril 2020John P. Brase oversees several business segments and functions at Smucker. He spent 30 years at Procter & Gamble, where he held various leadership roles in sales, marketing, and brand management .
    Jeannette L. KnudsenChief Legal Officer and SecretarySeptember 2022Jeannette L. Knudsen has been with Smucker since August 2002, holding various legal roles. Before joining Smucker, she practiced law at Buckingham, Doolittle & Burroughs, LLP .
    Jill R. PenroseChief People and Company Services OfficerMarch 2023Jill R. Penrose has been with Smucker since August 2004, serving in roles related to corporate strategy, organization development, and human resources. Before Smucker, she worked at Willis Towers Watson and PricewaterhouseCoopers .

    Questions to Ask Management

    1. Regarding Hostess, can you elaborate on the specific aspects of execution that weakened, what caused these issues, and how you plan to fix them?
    2. With the rising popularity of GLP-1 weight loss drugs potentially impacting indulgent snacking, how are you gathering information on this trend, and what resources are you dedicating to adapt your product portfolio, especially with brands like Hostess?
    3. Considering coffee prices have reached new highs with Arabica hitting $3, and you've already implemented two rounds of pricing, how do you plan to manage further inflation without significantly affecting demand due to price elasticity?
    4. Your EPS guidance has fluctuated this year from a midpoint of $10 to $9.80 and now back to $9.90; can you explain the factors behind this volatility and whether it indicates lower visibility into your business performance?
    5. In the pet food segment, you've implemented a price cut for Meow Mix and increased trade spend in cat food and dog snacks; what competitive pressures are driving these decisions, and how do you expect them to impact your margins and market share?

    Share Repurchase Program

    Program DetailsProgram 1
    Approval DateMarch 2, 2023
    End Date/Duration45 days after April 28, 2023
    Total additional amount3.5 million shares
    Remaining authorization1.1 million shares
    DetailsInitiated under the 10b5-1 Plan; repurchased 2.4 million shares for $362.8 million in 2024

    Past Guidance

    Q2 2025 Earnings Call

    • Issued Period: Q2 2025
    • Guided Period: FY 2025
    • Guidance:
      1. Net Sales: Increase of 8.5% to 9.5%.
      2. Adjusted Gross Profit Margin: 37.5% to 38%.
      3. SD&A Expenses: Increase by 9%.
      4. Marketing Expense: Slightly below 5.5% of net sales.
      5. Net Interest Expense: Approximately $400 million.
      6. Adjusted Effective Income Tax Rate: 24.3%.
      7. Weighted Average Share Count: 106.7 million.
      8. Adjusted EPS: $9.70 to $10.10.
      9. Free Cash Flow: Approximately $875 million.
      10. Depreciation and Amortization Expenses: $300 million and $225 million, respectively.
      11. Share-Based Compensation Expense: $35 million.
      12. Other Noncash Charges: $90 million.
      13. Third Quarter Guidance: Flat net sales; adjusted EPS decline mid-single digits.
      14. Voortman Divestiture Impact: Approximately $0.10 .

    Q1 2025 Earnings Call

    • Issued Period: Q1 2025
    • Guided Period: FY 2025
    • Guidance:
      1. Net Sales Growth: Increase of 8.5% to 9.5%.
      2. Adjusted Gross Profit Margin: Approximately 37.5%.
      3. SD&A Expenses: Increase by 9%.
      4. Total Marketing Expense: Slightly below 5.5% of net sales.
      5. Net Interest Expense: Approximately $400 million.
      6. Adjusted Effective Income Tax Rate: 24.3%.
      7. Weighted Average Share Count: 106.6 million.
      8. Adjusted EPS: $9.60 to $10.00.
      9. Free Cash Flow: Approximately $875 million.
      10. Capital Expenditures: $450 million.
      11. Depreciation Expense: $300 million.
      12. Amortization Expense: $225 million.
      13. Share-Based Compensation Expense: $35 million.
      14. Other Noncash Charges: $45 million.
      15. Leverage Ratio: Approximately 3x net debt to EBITDA by FY 2027 .

    Q4 2024 Earnings Call

    • Issued Period: Q4 2024
    • Guided Period: FY 2025
    • Guidance:
      1. Net Sales Growth: Increase of 9.5% to 10.5%.
      2. Comparable Net Sales Growth: 1.5% to 2.5%.
      3. Gross Profit Margin: Approximately 38%.
      4. SG&A Expenses: Increase by 13%.
      5. Marketing Expense: 5.5% of net sales.
      6. Net Interest Expense: Approximately $400 million.
      7. Adjusted Effective Income Tax Rate: 24.4%.
      8. Weighted Average Share Count: 106.4 million.
      9. Adjusted EPS: $9.80 to $10.20.
      10. Free Cash Flow: Approximately $900 million.
      11. Cost Synergies: $100 million by FY 2026 .

    Q3 2024 Earnings Call

    • Issued Period: Q3 2024
    • Guided Period: FY 2024
    • Guidance:
      1. Net Sales: Approximately $8.22 billion; decline of 3.6%.
      2. Comparable Net Sales Growth: 8.75%.
      3. Adjusted Gross Profit Margin: Approximately 37.5%.
      4. SD&A Expenses: Flat; includes $40 million preproduction expenses.
      5. Marketing Expense: 5.3% of net sales.
      6. Net Interest Expense: Approximately $270 million.
      7. Adjusted Effective Income Tax Rate: 24.6%.
      8. Weighted Average Share Count: 104.4 million.
      9. Adjusted EPS: $9.45 to $9.65.
      10. Fourth Quarter Comparable Net Sales: Mid-single-digit increase.
      11. Fourth Quarter Adjusted EPS: Mid-teen percentage decline.
      12. Free Cash Flow: Approximately $500 million.
      13. Capital Expenditures: $610 million.
      14. Transaction and Integration Costs: $155 million.
      15. Depreciation Expense: $240 million.
      16. Amortization Expense: $190 million.
      17. Share-Based Compensation Expense: $25 million.
      18. Other Noncash Charges: $35 million.
      19. Cash Tax Payments: $90 million incremental .

    Competitors

    Competitors mentioned in the company's latest 10K filing.

    • The Kraft Heinz Company: Competitor in mainstream roast and ground coffee with brands Maxwell House and Yuban .
    • Keurig Dr. Pepper: Competitor in mainstream roast and ground coffee with brand McCafé and in single serve coffee with brands Green Mountain Coffee, Donut Shop, and McCafé .
    • F. Gaviña & Sons, Inc.: Competitor in mainstream roast and ground coffee with brand Cafe La Llave .
    • Nestlé S.A.: Competitor in single serve coffee with brand Starbucks and in premium coffee with brands Starbucks and Seattle’s Best Coffee .
    • JDE Peet’s N.V.: Competitor in single serve coffee with brand Peet’s Coffee & Tea and in premium coffee with brand Peet’s Coffee & Tea .
    • Tata Global Beverages Limited: Competitor in premium coffee with brand Eight O’Clock .
    • Community Coffee Company: Competitor in premium coffee with brand Community Coffee .
    • Hormel Foods Corporation: Competitor in peanut butter and specialty spreads with brand Skippy .
    • Ferrero SpA: Competitor in peanut butter and specialty spreads with brand Nutella .
    • Post Holdings, Inc.: Competitor in peanut butter and specialty spreads with brand Peter Pan .
    • Welch Foods Inc.: Competitor in fruit spreads with brand Welch’s .
    • Andros Foods USA, Inc.: Competitor in fruit spreads with brand Bonne Maman .
    • Nestlé S.A.: Competitor in frozen sandwiches and snacks with brand Hot Pockets .
    • General Mills, Inc.: Competitor in frozen sandwiches and snacks with brand Totino’s and in pet snacks with brand Blue Buffalo and Nudges .
    • Ruiz Foods: Competitor in frozen sandwiches and snacks with brand El Monterrey .
    • Nestlé Purina PetCare Company: Competitor in mainstream cat food with brands Cat Chow, Friskies, Kit & Kaboodle, and Fancy Feast, and in pet snacks with brand Beggin’ Strips .
    • Mars, Incorporated: Competitor in mainstream cat food with brands Iams and Sheba, and in pet snacks with brands Dentastix and Greenies .
    • McKee Foods Corporation: Competitor in sweet baked goods with brand Little Debbie .
    • Grupo Bimbo, S.A.: Competitor in sweet baked goods with brand Entenmann’s .
    • Mondelez International: Competitor in cookies with brand Nabisco .
    • Restaurant Brands International Inc.: Competitor in Canada coffee with brand Tim Hortons .

    Latest news

    Recent developments and announcements about SJM.

    Financial Reporting

      Earnings Call

      ·
      Nov 27, 2024, 12:02 AM

      The J.M. Smucker Company (SJM) recently released its fiscal 2025 second quarter earnings call transcript. Here are the key points from the earnings call:

      • Revenue and Profit Performance: The company reported a 17% increase in net sales, exceeding expectations. Comparable net sales, excluding the Hostess Brands acquisition and divested businesses, increased by 2% . Adjusted gross profit rose by 17%, driven by favorable volume mix and higher net price realization .

      • Management’s Forward Guidance: SJM increased its full-year adjusted earnings per share guidance, reflecting strong performance and sustained consumer demand for its brands . The company anticipates full-year net sales to increase by 8.5% to 9.5% compared to the prior year .

      • Market Conditions and Strategic Initiatives: The company highlighted the growth of its Uncrustables brand, which saw a 16% increase in net sales, and the successful start of production at a new manufacturing facility in Alabama . The company is also focusing on expanding distribution and innovation for the Hostess brand to return it to growth .

      • Analyst Questions and Management Responses: During the Q&A session, management addressed questions about the impact of inflationary pressures on consumer spending and the company's strategies to mitigate these challenges. They emphasized their focus on cost management and strategic investments in key growth platforms .

      • Significant Comments on Market Conditions: The company noted that the sweet baked goods category is recovering slower than anticipated due to inflationary pressures and reduced discretionary income . However, they remain confident in their long-term growth strategy and the potential of their brand portfolio .

      Overall, SJM is optimistic about its growth prospects, driven by strong brand performance and strategic initiatives to enhance distribution and product offerings.

      Earnings Call

      ·
      Nov 26, 2024, 4:03 PM

      The SJM company recently held its fiscal 2025 second quarter earnings call, where several key points were discussed. The company reported strong performance in its coffee segment despite ongoing inflationary pressures, with Arabica coffee prices reaching $3, a level not seen in over a decade . SJM has implemented two rounds of pricing to manage these costs and expects coffee sales to remain flat in the third quarter due to these pricing adjustments .

      In terms of strategic initiatives, SJM is focusing on expanding its Hostess brand through increased marketing efforts and co-promotions with other brands like coffee . The company is also addressing the impact of GLP-1 weight loss drugs on consumer behavior, although no significant effects have been observed yet .

      Management provided forward guidance, indicating a cautious outlook due to economic conditions affecting consumer discretionary spending. They are working on mitigating stranded overhead costs from the pet food divestiture and expect these efforts to not impact earnings negatively in the next fiscal year .

      Analysts raised questions about the company's ability to manage costs and maintain growth, particularly in the coffee and pet food segments. SJM's leadership expressed confidence in their strategies to address these challenges, including leveraging innovation and adjusting pricing strategies .

      Overall, SJM is navigating a complex market environment with a focus on maintaining profitability and growth through strategic pricing, cost management, and brand expansion initiatives.

      Earnings Report

      ·
      Nov 26, 2024, 12:46 PM

      The J.M. Smucker Co. Announces Fiscal 2025 Second Quarter Results

      On November 26, 2024, The J.M. Smucker Co. released its financial results for the second quarter of fiscal year 2025, which ended on October 31, 2024. Here are the key highlights from the earnings report:

      • Net Sales: The company reported net sales of $2.3 billion, marking an increase of 17% compared to the same quarter last year. Excluding the impact of acquisitions, divestitures, and foreign currency exchange, net sales increased by 2% .

      • Earnings: The net loss per diluted share was $0.23, while adjusted earnings per share increased by 7% to $2.76 .

      • Cash Flow: Cash provided by operations was $404.2 million, a significant increase from $176.9 million in the prior year. Free cash flow also saw a substantial rise to $317.2 million from $28.2 million in the previous year .

      • Segment Performance:

        • U.S. Retail Coffee: Net sales increased by 3% to $704.0 million, with a segment profit margin of 28.8% .
        • U.S. Retail Frozen Handheld and Spreads: Net sales rose by 5% to $485.2 million, though segment profit decreased by 10% .
        • U.S. Retail Pet Foods: Net sales decreased by 4% to $445.4 million, but segment profit increased by 25% .
        • Sweet Baked Snacks: This segment contributed $315.5 million in net sales .
        • International and Away From Home: Net sales decreased by 1% to $321.1 million, with a segment profit increase of 13% .

      • CEO Remarks: Mark Smucker, Chair of the Board, President, and CEO, highlighted the company's strong performance in key growth platforms and the strategic focus on integrating Hostess Brands and divesting the Voortman® business to prioritize growth opportunities .

      • Outlook: The company updated its full-year fiscal 2025 guidance, expecting net sales to increase by 8.5% to 9.5% compared to the prior year, with adjusted earnings per share projected to be between $9.70 and $10.10 .

      This report reflects the company's strategic initiatives and financial health, showcasing growth in several key areas despite challenges in others.