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    J M Smucker Co (SJM)

    Q3 2025 Earnings Summary

    Reported on Feb 27, 2025 (Before Market Open)
    Pre-Earnings Price$109.16Last close (Feb 26, 2025)
    Post-Earnings Price$104.57Open (Feb 27, 2025)
    Price Change
    $-4.59(-4.20%)
    • The company's Coffee segment delivered a strong profit margin of 28% in Q3, exceeding expectations due to favorable price elasticities and cost management. This performance demonstrates the resilience of the coffee business and its ability to manage through high commodity costs, with the expectation that coffee commodities will normalize over time.
    • Synergies from the Hostess acquisition are tracking ahead of schedule, with approximately $70 million expected by the end of this fiscal year towards the $100 million target by the end of FY 2026. This accelerated synergy realization should contribute positively to future earnings growth.
    • The company remains focused on long-term 4% growth in the Sweet Baked Snacks segment despite recent challenges, and is implementing five key strategic pillars along with new leadership to stabilize and return the Hostess brand to growth. Additionally, there is strong retailer support and a robust innovation pipeline in Sweet Baked Snacks, which should drive future performance.
    • The company took a $1 billion impairment charge for Sweet Baked Snacks (Hostess), driven by diminishing top line performance and underperformance of the Hostess brand, indicating significant challenges in the recent acquisition. , ,
    • The fiscal 2025 sales guidance was revised down from 8% at the midpoint to 7.25%, reflecting a miss in the third quarter and a reduced outlook for Hostess, suggesting ongoing operational issues and integration difficulties. , ,
    • The company faces a meaningful headwind in fiscal 2026 due to record high green coffee costs, and is uncertain about achieving earnings growth, potentially impacting future profitability. ,
    MetricYoY ChangeReason

    Total Revenue

    ~–2% (from $2,229M in Q3 2024 to $2,186M in Q3 2025)

    Revenue decreased slightly by approximately 2% as the stable U.S. segment performance (U.S. revenue at $2,068.4M) did not offset weaker contributions from international markets, where challenges like previous divestitures and lower sales volumes likely continued to weigh on overall revenue.

    Operating Income (EBIT)

    Dropped from $297.4M in Q3 2024 to –$594M in Q3 2025

    EBIT reversed dramatically by roughly $891M, driven by higher operating expenses and significant one-time charges or impairments not encountered in the prior period, reflecting severe margin pressure and operational challenges.

    Net Income

    Fell from $120.4M in Q3 2024 to –$662.3M in Q3 2025

    Net income declined sharply by about $782.7M, mirroring the EBIT deterioration and compounded by additional factors such as increased interest expenses or tax impacts, marking a substantial deterioration in profitability compared to the previous period.

    EPS – Basic

    Turned from $1.12 in Q3 2024 to –$6.23 in Q3 2025

    EPS eroded drastically from a positive $1.12 to a loss of $6.23 per share, reflecting the steep decline in net income and overall earnings deterioration, which underscores the severe impact of the operating challenges faced in Q3 2025.

    Geographic Revenue Breakdown

    U.S. Dominance: U.S. at $2,068.4M; International at ~$117.6M

    Heavy U.S. exposure continues with the U.S. market generating the bulk of revenue, while international sales remain modest; this concentration poses risks given that past international challenges such as divestitures (e.g., Canadian and other markets) impacted overall revenue growth.

    MetricPeriodPrevious GuidanceCurrent GuidanceChange

    Comparable Sales Guidance

    FY 2025

    8% at the midpoint

    7.25% at the midpoint

    lowered

    Coffee Segment

    FY 2025

    Expected margins for Q3 forecasted as “mid-20s to low-20s”

    Achieved a 28% profit margin in Q3, with an expectation of pressure in Q4

    raised

    Pet Segment

    FY 2025

    no prior guidance

    Expected sequential improvement in the pet portfolio

    no prior guidance

    Sweet Baked Snacks

    FY 2025

    no prior guidance

    Revised sales target changed from $1.4B to $1.2B; long-term growth rate of 4%

    no prior guidance

    MetricPeriodGuidanceActualPerformance
    Total Q3 2025 Sales (YoY)
    Q3 2025 vs. Q3 2024
    Flat year-over-year sales
    2,186.0 vs. 2,229.2 (–1.9% YoY)
    Missed
    Coffee Segment Q3 2025 Sales (YoY)
    Q3 2025 vs. Q3 2024
    Flat YoY
    830.8 vs. 817.6 (+1.6% YoY)
    Beat
    TopicPrevious MentionsCurrent PeriodTrend

    Hostess Acquisition and Integration

    Q1: Emphasized integration progress, strong synergy realization, and acknowledged execution challenges and reduced top‐line guidance. Q2: Focused on achieving $100 million in cost synergies, noted execution issues and consumer cautiousness but remained optimistic about long‑term potential.

    Q3: Highlighted significant impairment charges (an $800 million goodwill write‑down and a $200 million impairment), persistent execution missteps, and a reduced fiscal sales target – while maintaining long‑term bullishness on the brand.

    Mixed sentiment: While the long‑term potential remains intact, there is increased emphasis on execution challenges and higher impairment charges in Q3.

    Coffee Segment Performance and Commodity Cost Management

    Q1: Addressed margin pressures from green coffee inflation, outlined pricing actions to recover costs, and noted the need to manage price elasticity across a broad portfolio. Q2: Reported strong Q2 margins (28%) but warned of future margin pressures driven by record high green coffee costs and pricing challenges.

    Q3: Continued to report robust margins (28%), yet underscored that record high green coffee commodity costs are a significant headwind for future quarters and earnings, reiterating the critical need for aggressive pricing and cost management strategies.

    Consistent with heightened caution: Strong current margins continue but with an increased focus on upcoming headwinds from green coffee costs.

    Core Brand Growth and Innovation

    Q1: Highlighted double‑digit growth for Uncrustables and strong performances from Café Bustelo and Milk‑Bone, with innovation (such as peanut buttery bites) supporting brand expansion and capacity growth. Q2: Emphasized robust performance and innovation across core brands with strong sales projections, notably for Uncrustables and Meow Mix.

    Q3: No mention of core brand performance or product innovation was recorded during the earnings call.

    Disappeared: A formerly key discussion point is absent in Q3, indicating reduced focus or less material news on these brands in the current period.

    Revised Sales Guidance and Macroeconomic Headwinds

    Q1: Noted a revision in full‑year sales guidance (from 10% to 9%) due to category softness (particularly Sweet Baked Snacks) and operational slowdowns stemming from inflation and reduced discretionary income. Q2: Also pointed to headwinds from inflation and lower discretionary income impacting multiple channels and driving lower-than-expected performance.

    Q3: Reported a downward revision in comparable sales guidance (from 8% to 7.25%) with a $60 million reduction, attributed to a Q3 miss, a call‑down in Hostess sales, elevated gas prices, cautious consumer behavior, and instance‐specific execution issues such as supply disruptions in pet food.

    Consistently negative: The sentiment remains cautious with ongoing macroscopic pressures, though Q3 provides more specificity in numbers and additional supply chain issues.

    Emerging Consumer Trends Impacting Demand

    Q1: Acknowledged monitoring of GLP‑1 weight loss drugs but found no meaningful impact on Sweet Baked Snacks; softness was chalked up to reduced discretionary income. Q2: Recognized the potential risk from increased GLP‑1 uptake but noted that no material impact had yet been observed, while considering innovation responses such as portion adjustments and sugar reduction.

    Q3: Reiterated that there is no material impact from GLP‑1 drugs on demand for indulgent snacking; instead, declines are attributed to a more cautious consumer influenced by factors like high gas prices and limited discretionary spending, with some acknowledgement of execution missteps.

    Stable but monitored: The potential risk is acknowledged consistently, though all periods conclude that GLP‑1 drugs have not materially affected demand.

    Divestiture Impact on Earnings

    Q1: No specific discussion on the earnings effects of the Voortman divestiture was provided [no citation]. Q2: Detailed expectations of a full‑year earnings hit of $0.25, with a current year impact of $0.10 offset partially by debt paydown proceeds, resulting in a net impact of about $0.05.

    Q3: Mentioned only in the context of the Sweet Baked Snacks top‑line outlook (revised from $1.4 billion to $1.2 billion) with just $65 million of the reduction attributed to the Voortman divestiture, with no direct earnings impact commentary.

    Diminished focus: Earlier detailed earnings concerns in Q2 have been de‐emphasized in Q3, with the divestiture now mentioned only indirectly via top‑line revisions.

    1. Hostess Impairment and M&A Strategy
      Q: Why did you record a $1 billion impairment on Hostess?
      A: We recorded impairment charges due to recent underperformance of the Hostess brand, reducing our top-line outlook from $1.4 billion to $1.2 billion, with only $65 million due to the Voortman divestiture. Despite this, we remain confident in the acquisition, focusing on stabilizing the business through leadership changes and five strategic pillars. We're committed to our long-term 4% growth outlook for the business.

    2. Fiscal '26 Earnings Outlook
      Q: Will earnings grow in fiscal '26 amid coffee headwinds?
      A: It's too early to provide detailed guidance for fiscal '26. We see a path to above-algorithm adjusted EPS growth, but green coffee inflation poses a meaningful headwind. We're assessing the impact of price elasticity due to higher costs and will offer more specifics once our planning process is complete.

    3. Coffee Margins and Pricing
      Q: How is coffee performing amid rising costs?
      A: Despite record high coffee costs, our coffee business delivered strong margins of 28% this quarter, better than expected due to favorable price elasticity and volume mix. We anticipate margins will decrease in Q4 as we enter our highest cost period. Additional pricing actions may occur in the first half of next fiscal year when our physical costs dictate.

    4. Pet Food Segment Recovery
      Q: Is the pet food supply disruption resolved?
      A: Yes, the $30 million supply chain disruption in Q3 is behind us. We view it as a one-time event and are back to full distribution, primarily on the Milk-Bone brand. We expect no material impact or additional investment in the pet segment in Q4.

    5. Sweet Baked Snacks and GLP-1 Impact
      Q: Are GLP-1 drugs affecting sweet snack sales?
      A: Based on our data, we don't see material impact from GLP-1s on the sweet snacks category. The decline is due to a more cautious consumer and our own executional missteps, which we're addressing. Products like Donettes continue to perform well, particularly in the breakfast occasion.

    6. Frozen Handhelds and Spreads Investments
      Q: How are investments in frozen handhelds affecting earnings?
      A: We anticipated a $0.35 earnings headwind this fiscal year due to investments in frozen handhelds and spreads. In Q3, expenses were slightly better than prior year due to favorable preproduction costs. In Q4, we expect similar improvement but will continue elevated marketing to support the brands.

    7. Jif and Fruit Spreads Performance
      Q: What's causing declines in Jif and fruit spreads?
      A: Jif had a slight decline this quarter due to timing but has performed strongly this year and is expected to continue doing well. Fruit spreads faced competitive activity; we're increasing marketing and advertising to stabilize the brand.

    8. Retailer Support for Sweet Snacks
      Q: Are retailers hesitant to stock sweet snacks?
      A: No, we haven't seen pushback from retailers. We're collaborating closely to improve shelf sets and have a robust pipeline of innovations and limited-time offerings to drive category growth.

    9. Coffee Commodity Sustainability
      Q: Are coffee supply issues causing price concerns?
      A: The coffee commodity is cyclical; current high costs result from supply deficits. We expect normalization over time and are supporting farmers to improve crops and resilience to climate change. We remain confident in the long-term sustainability of coffee supply.