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J M SMUCKER Co (SJM)·Q3 2025 Earnings Summary

Executive Summary

  • Q3 FY2025 delivered net sales of $2.186B (-2% YoY) and adjusted EPS of $2.61 (+5% YoY); GAAP EPS was -$6.22 due to $1.00B in noncash impairments tied to Sweet Baked Snacks goodwill and the Hostess trademark .
  • Guidance shifted: net sales growth lowered to 7.25% (from 8.5–9.5%), while adjusted EPS was raised to $9.85–$10.15; free cash flow was lifted to $925M and capex cut to $400M, reflecting cost discipline and stronger margin assumptions (adj. gross margin ~38%) .
  • Operationally, pet supply chain disruptions (~$30M impact, primarily Milk-Bone) are largely behind them and expected to improve sequentially in Q4; coffee performed better than expected on pricing/elasticities, though Q4 faces the highest cost basket .
  • Strategic actions included leadership changes over Pet and Sweet Baked Snacks and divestiture of value brands (Cloverhill, Big Texas, select private label) to focus resources on the Hostess brand and deleveraging .
  • Near-term stock catalysts: Hostess stabilization execution (new leadership, 5-pillar plan), clarity on Q4 coffee margins/pricing cadence, and delivery vs updated FY25 EPS/FCF targets .

What Went Well and What Went Wrong

  • What Went Well

    • Adjusted EPS beat internal expectations ($2.61, +5% YoY) despite top-line headwinds; CEO cited disciplined cost management and execution .
    • Coffee delivered strong profitability (segment margin 28.2%) with pricing holding and elasticities supportive; management noted affordability and portfolio breadth across value/premium .
    • Cash discipline: FY25 FCF guidance raised to $925M and capex cut to $400M amid improved margin assumptions and lower SD&A growth .

  • What Went Wrong

    • Sweet Baked Snacks underperformed (net sales -7% YoY; segment profit -19%; margin down 290 bps), leading to $794.3M goodwill and $208.2M trademark impairments and increased marketing spend; lower pricing and mix hurt results .
    • Pet faced a ~$30M supply chain disruption (primarily Milk-Bone), with dog snacks down; segment net sales -9% YoY, though profit rose on lower costs .
    • Net sales fell 2% YoY to $2,186M driven by volume/mix -5 pts (coffee, dog snacks, lower contract manufacturing), partially offset by +3 pts price (coffee) and Hostess contribution; operating margin was -27.2% on impairments and divestiture losses .

Financial Results

MetricQ1 2025Q2 2025Q3 2025
Net sales ($USD Millions)$2,125.1 $2,271.2 $2,186.0
GAAP EPS ($)$1.74 ($0.23) ($6.22)
Adjusted EPS ($)$2.44 $2.76 $2.61
Gross margin (%)37.5% 39.0% 40.2%
GAAP operating margin (%)16.4% 7.5% (27.2)%
Adjusted operating margin (%)21.1% 21.6% 21.2%
Consensus Revenue ($)Unavailable (SPGI rate limit)Unavailable (SPGI rate limit)Unavailable (SPGI rate limit)
Consensus EPS ($)Unavailable (SPGI rate limit)Unavailable (SPGI rate limit)Unavailable (SPGI rate limit)

Segment net sales ($USD Millions):

SegmentQ1 2025Q2 2025Q3 2025
U.S. Retail Coffee$623.4 $704.0 $740.6
U.S. Retail Frozen Handheld & Spreads$496.8 $485.2 $445.2
U.S. Retail Pet Foods$399.7 $445.4 $423.0
Sweet Baked Snacks$333.7 $315.5 $278.6
International & Away From Home$271.5 $321.1 $298.6

Segment profit ($USD Millions) and margins:

SegmentQ1 2025 ProfitQ1 MarginQ2 2025 ProfitQ2 MarginQ3 2025 ProfitQ3 Margin
U.S. Retail Coffee$172.6 27.7% $202.7 28.8% $208.6 28.2%
Frozen Handheld & Spreads$119.0 24.0% $116.1 23.9% $99.2 22.3%
Pet Foods$115.3 28.8% $121.4 27.3% $116.8 27.6%
Sweet Baked Snacks$74.4 22.3% $70.6 22.4% $54.8 19.7%
International & AFH$48.6 17.9% $68.0 21.2% $61.6 20.6%

KPIs and Cash Metrics:

KPI ($USD Millions)Q1 2025Q2 2025Q3 2025
Cash from operations$172.9 $404.2 $239.4
Free cash flow$49.2 $317.2 $151.3
Capital expenditures$123.7 $87.0 $88.1
Dividends declared per share ($)$1.08 $1.08 $1.08

Note: Consensus estimates were unavailable at the time of query due to S&P Global request limits; comparisons vs estimates are therefore not provided.

Guidance Changes

MetricPeriodPrevious GuidanceCurrent GuidanceChange
Net sales growth vs prior yearFY20258.5–9.5% (Q2 update) 7.25% Lowered
Adjusted EPS ($)FY2025$9.70–$10.10 (Q2 update) $9.85–$10.15 Raised
Free cash flow ($M)FY2025$875 $925 Raised
Capital expenditures ($M)FY2025$450 $400 Lowered
Adjusted effective tax rate (%)FY202524.3% 24.1% Lowered
Interest expense ($M)FY2025$400 $390 Lowered
Adjusted gross margin (%)FY2025~37.5–38.0% ~38.0% Slightly higher midpoint
SD&A growth (%)FY2025~9.0% ~8.0% Lowered

Earnings Call Themes & Trends

TopicPrevious Mentions (Q1, Q2)Current Period (Q3)Trend
Sweet Baked Snacks/Hostess executionQ2: Voortman classified as held for sale; updated FY25 guide maintained, Hostess contribution noted . Q1: Focus on integrating Hostess and portfolio optimization .$1.0B impairment (goodwill/trademark); sales -7% YoY; 5-pillar plan and leadership changes to stabilize Hostess; long-term 4% growth target reiterated .Stabilization phase; near-term revenue base lower; leadership refocus; marketing support increased .
Coffee pricing and cost inflationQ1: Higher green coffee costs anticipated; pricing actions expected; guide reduced for net sales amid elasticity . Q2: Coffee margin strong; continued commodity pressure .Q3 margin 28.2%; elasticities holding; sequential margin decline expected in Q4 given highest cost basket; potential FY26 pricing in 1H .Near-term headwind; pricing cadence to continue; consumer affordability supports category .
Pet supply chain & merchandisingQ1/Q2: Pet profits rising on lower costs; contract manuf. declines .~$30M disruption largely behind; sequential Q4 improvement expected; merch investment not materially delayed .Recovery underway; focus on shelf/in-stock (Milk-Bone) .
Uncrustables capacity/expensesQ1/Q2: Pre-production/McCalla start-up costs; elevated marketing; strong volume .Lower pre-production expenses in Q3; continued elevated marketing; Frozen segment margin down YoY .Investments tapering gradually; brand growth remains solid .
Macro/GLP-1 and category demandQ1/Q2: Dynamic consumer environment noted .Management sees no material GLP-1 impact on sweet snacks; convenience channel softness and execution issues cited .Monitoring; category pressures seen as cyclical/value-driven .
Synergies and FY26 outlookQ2: Tracking toward $100M by FY26 end .~$70M by FY25 exit; ~$30M left in FY26; FY26 EPS growth uncertain due to coffee costs .On track; FY26 visibility limited by commodity .

Management Commentary

  • “Net sales for the quarter would have been above our expectations, however, we experienced certain supply chain disruptions that negatively impacted results. Disciplined cost management and execution enabled us to deliver adjusted earnings per share that exceeded our expectations.” — Mark Smucker, CEO .
  • “Our guidance revision… down to 7.25%… reflects about $60 million… the net $20 million miss [in Q3] and a call down in Hostess by approximately $20 million in our fourth quarter.” — Tucker Marshall, CFO .
  • “We remain very confident in the Hostess acquisition… taking specific actions to stabilize the brand… and announcing new leadership changes… intended to accelerate implementation.” — Mark Smucker .
  • “We did share that we could see a path to an above algorithm year for adjusted EPS [FY26]. However… green coffee inflation… will be a meaningful headwind… too early to call.” — Tucker Marshall .
  • “At-home coffee is… the most affordable way to consume coffee compared to other formats… we offer the consumer a range of choice and value.” — Mark Smucker .

Q&A Highlights

  • Hostess impairments and strategy: Management emphasized confidence in brand equity, identified execution missteps (distribution/merchandising), and outlined 5 stabilization pillars and leadership changes; long-term 4% growth target maintained despite near-term reset .
  • FY26 outlook and coffee: Too early to guide; coffee commodities remain at record highs and are a meaningful headwind; Q4 coffee steps into highest cost basket .
  • Coffee margins and elasticities: Q3 coffee margin 28% exceeded expectations; pricing and cost management helped, but sequential margin decline in Q4 anticipated .
  • Pet disruptions and recovery: ~$30M supply chain disruption in Q3 largely behind; Q4 expected to be mostly clean with normal brand support .
  • Frozen/Uncrustables investment cadence: Start-up costs improving; Q4 slightly better YoY but marketing remains elevated to support brands .

Estimates Context

  • Wall Street consensus estimates (EPS, revenue) from S&P Global were unavailable at the time of query due to request limits; as a result, we cannot provide definitive beat/miss vs consensus for Q3 FY2025.
  • The company raised FY25 adjusted EPS guidance ($9.85–$10.15) and free cash flow ($925M) while lowering net sales growth to 7.25%, suggesting consensus may need to adjust upward for EPS/FCF and downward for reported sales growth to align with updated company guidance .

Key Takeaways for Investors

  • GAAP loss driven by $1.00B noncash impairments (Sweet Baked Snacks goodwill $794.3M; Hostess trademark $208.2M) and divestiture losses; core adjusted profitability remained resilient (adj. operating margin ~21%) .
  • Guidance mix shift: lower net sales growth but higher adjusted EPS and FCF, with tighter cost/SD&A and capex discipline; interest expense outlook improved ($390M) .
  • Coffee strength is intact (Q3 margin 28.2%) but Q4/FY26 face commodity cost headwinds; pricing actions likely in 1H FY26 as costs flow through inventory .
  • Pet disruptions largely resolved; expect sequential recovery in Q4 with Milk-Bone back on shelf and distribution normalizing .
  • Sweet Baked Snacks requires executional turnaround; leadership changes and portfolio optimization (divesting Cloverhill/Big Texas/private label) aim to refocus on Hostess core .
  • Synergies tracking (~$70M exiting FY25; ~$30M to reach $100M by FY26) provide medium-term earnings support even as commodities remain volatile .
  • Trading implications: monitor Q4 delivery vs raised EPS/FCF targets, coffee margin trajectory, and tangible progress on Hostess stabilization (distribution, pricing, innovation pipeline) as catalysts for sentiment/valuation .