J. M. Smucker(SJM) - 2026 Q1 - Quarterly Results

Executive Summary The company reported Q1 results exceeding expectations, driven by strong consumer demand and cost management, leading to raised full-year net sales expectations despite a Q1 net sales decrease to $2.1 billion and a net loss per diluted share CEO Remarks CEO Mark Smucker highlighted that Q1 results exceeded expectations, driven by strong top-line growth from consumer demand and disciplined cost management, leading to raised full-year net sales expectations and continued focus on long-term growth - Q1 results exceeded expectations, reflecting continued business momentum and agility in a dynamic external environment[3] - Strong top-line growth was driven by consumer demand for leading brands, while bottom-line results reflected disciplined cost management[3] - Full-year net sales expectations are being raised due to better-than-expected Q1 results and sustained brand momentum[3] - The company remains focused on investing in key growth platforms to deliver long-term growth and increase shareholder value[3] Q1 Fiscal 2026 Financial Highlights The J.M. Smucker Co. reported Q1 FY26 net sales of $2.1 billion, a 1% decrease, but a 2% increase excluding divestitures and foreign currency, with a net loss per diluted share of ($0.41) and adjusted EPS decreasing 22% to $1.90 Q1 Fiscal 2026 Financial Highlights | Metric | Q1 FY26 | | :-------------------------------- | :-------- | | Net sales | $2.1 billion | | Net sales (excl. divestitures & FX) | 2% increase | | Net loss per diluted share | ($0.41) | | Adjusted earnings per share | $1.90 | | Cash used for operating activities | ($10.6) million | | Free cash flow | ($94.9) million | - The company updated its full-year fiscal 2026 financial outlook[4] First Quarter Consolidated Financial Performance Q1 FY26 saw a 1% net sales decrease to $2.1 billion, an 87% operating income decline, and a shift to negative operating cash flow, primarily due to lower net income and higher commodity costs Overview of Consolidated Results For Q1 FY26, net sales decreased 1% to $2,113.3 million, while operating income saw a significant 87% decrease to $45.6 million, resulting in a net loss per common share of ($0.41) and adjusted earnings per share decreasing 22% to $1.90 Consolidated Results | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | % Increase (Decrease) | | :--------------------------------------- | :----------------- | :----------------- | :-------------------- | | Net sales | $2,113.3 | $2,125.1 | (1)% | | Operating income | $45.6 | $349.5 | (87)% | | Adjusted operating income | $370.3 | $447.9 | (17)% | | Net income (loss) per common share – assuming dilution | ($0.41) | $1.74 | (124)% | | Adjusted earnings per share – assuming dilution | $1.90 | $2.44 | (22)% | Net Sales Analysis Net sales decreased by $11.8 million or 1% overall, but comparable net sales increased by $41.2 million or 2% excluding divestitures and foreign currency, driven by a 6 percentage point increase from net price realization, partially offset by a 4 percentage point decrease from volume/mix Net Sales | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (Millions) | % Change | | :--------------------------------------- | :----------------- | :----------------- | :---------------- | :--------- | | Net sales | $2,113.3 | $2,125.1 | ($11.8) | (1)% | | Net sales excluding divestitures & FX | $2,113.5 | $2,072.3 | $41.2 | 2% | - Comparable net sales increased 2%, driven by a 6 percentage point increase from net price realization (primarily coffee), partially offset by a 4 percentage point decrease from volume/mix (coffee, dog snacks, sweet baked goods, fruit spreads)[7] Operating Income and Gross Profit Gross profit decreased significantly by $322.5 million or 40%, primarily due to higher commodity costs and unfavorable volume/mix, leading to an 87% decrease in operating income to $45.6 million, despite lower SD&A expenses and reduced amortization Gross Profit and Operating Income | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | % Increase (Decrease) | | :------------------------ | :----------------- | :----------------- | :-------------------- | | Gross Profit | $474.7 | $797.2 | (40)% | | Operating Income | $45.6 | $349.5 | (87)% | | Adjusted gross profit | $743.2 | $832.5 | (11)% | | Adjusted operating income | $370.3 | $447.9 | (17)% | - Gross profit decrease was primarily due to higher commodity costs, unfavorable volume/mix, and divestitures, partially offset by higher net price realization[8] - Operating income decrease was primarily due to the decrease in gross profit, partially offset by lower SD&A expenses and amortization[8] Interest Expense and Income Taxes Net interest expense remained comparable to the prior year, while the effective income tax rate decreased to 22.3% from 24.8%, mainly due to a loss before income taxes in the current period Interest Expense and Income Tax Rates | Metric | Q1 FY26 | Q1 FY25 | Change | | :------------------------ | :------ | :------ | :----- | | Net interest expense | ($100.2)M | ($100.4)M | — % | | Effective income tax rate | 22.3% | 24.8% | (2.5) ppts | | Adjusted effective income tax rate | 24.2% | 24.6% | (0.4) ppts | - Decrease in effective income tax rate was primarily due to a loss before income taxes in the current year[10] Cash Flow and Debt Cash flow from operating activities shifted from a $172.9 million provision to a $10.6 million use in Q1 FY26, primarily reflecting lower net income, leading to a significant decrease in free cash flow to ($94.9) million Cash Flow | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (Millions) | | :------------------------------------ | :----------------- | :----------------- | :---------------- | | Net Cash Provided by (Used for) Operating Activities | ($10.6) | $172.9 | ($183.5) | | Free cash flow | ($94.9) | $49.2 | ($144.1) | - The decrease in cash provided by operating activities primarily reflects lower net income (loss) and related tax impacts[11] Full-Year Fiscal 2026 Financial Outlook The company updated its FY26 guidance, raising net sales growth expectations to 3.0%-5.0% and free cash flow to $975.0 million, while maintaining adjusted EPS guidance of $8.50-$9.50 Updated Guidance Summary The company updated its full-year fiscal 2026 guidance, raising net sales increase expectations to 3.0% to 5.0% and free cash flow to $975.0 million, while adjusted earnings per share guidance remains unchanged at $8.50 - $9.50 Full-Year Fiscal 2026 Guidance | Metric | Current FY26 Guidance | Previous FY26 Guidance | | :-------------------------- | :-------------------- | :--------------------- | | Net sales increase vs. prior year | 3.0% to 5.0% | 2.0% to 4.0% | | Adjusted earnings per share | $8.50 - $9.50 | $8.50 - $9.50 | | Free cash flow (in millions) | $975.0 | $875.0 | | Capital expenditures (in millions) | $325.0 | $325.0 | | Adjusted effective income tax rate | 23.8% | 23.7% | - The updated guidance reflects current understanding of a dynamic external environment, including tariffs, regulatory changes, input inflation, and consumer behavior shifts[13] Detailed Outlook Components The updated net sales guidance of 3.0% to 5.0% includes a $134.7 million impact from divestitures, with comparable net sales expected to increase approximately 4.5% to 6.5%, driven by higher net price realization, and adjusted EPS guidance of $8.50 to $9.50 is based on an adjusted gross profit margin of 35.0% to 35.5% - Comparable net sales are expected to increase approximately 4.5% to 6.5%, excluding divestitures, driven by higher net price realization, partially offset by a decline in volume/mix[14] - Adjusted gross profit margin is expected to be approximately 35.0% to 35.5%[14] - SD&A expenses are projected to increase by approximately 3.0% versus the prior year[14] - Interest expense is estimated at approximately $380.0 million[14] - Free cash flow is expected to be approximately $975.0 million, with capital expenditures of $325.0 million[14] First Quarter Segment Performance Q1 segment performance was mixed, with U.S. Retail Coffee and International and Away From Home showing sales growth, while other U.S. segments and Sweet Baked Snacks experienced sales and profit declines due to volume/mix and higher costs U.S. Retail Coffee The U.S. Retail Coffee segment reported a 15% increase in net sales to $717.2 million, driven by an 18 percentage point increase from net price realization, but segment profit decreased by 22% to $134.2 million due to higher commodity costs and unfavorable volume/mix U.S. Retail Coffee Segment Performance | Metric | FY26 Q1 Results | Increase (decrease) vs. prior year | | :---------------- | :-------------- | :--------------------------------- | | Net Sales | $717.2M | 15% | | Segment Profit | $134.2M | (22)% | | Segment Profit Margin | 18.7% | -900bps | - Net price realization increased net sales by 18 percentage points, primarily from higher net pricing across the portfolio[15] - Segment profit decrease was primarily due to higher commodity costs, unfavorable volume/mix, and higher marketing spend[15] U.S. Retail Frozen Handheld and Spreads Net sales for U.S. Retail Frozen Handheld and Spreads decreased by 2% to $484.7 million, driven by a 2 percentage point decrease from volume/mix and a 1 percentage point decrease from net price realization, leading to a 4% decrease in segment profit to $114.3 million U.S. Retail Frozen Handheld and Spreads Segment Performance | Metric | FY26 Q1 Results | Increase (decrease) vs. prior year | | :---------------- | :-------------- | :--------------------------------- | | Net Sales | $484.7M | (2)% | | Segment Profit | $114.3M | (4)% | | Segment Profit Margin | 23.6% | -40bps | - Volume/mix decreased net sales by 2 percentage points (peanut butter, fruit spreads), partially offset by Uncrustables sandwiches[16] - Segment profit decrease was primarily driven by higher marketing spend and unfavorable volume/mix, partially offset by lower pre-production expenses related to the new Uncrustables facility[16] U.S. Retail Pet Foods The U.S. Retail Pet Foods segment experienced an 8% decrease in net sales to $368.0 million, primarily due to an 8 percentage point decrease from volume/mix, resulting in a 12% decrease in segment profit to $101.3 million due to unfavorable volume/mix and higher costs U.S. Retail Pet Foods Segment Performance | Metric | FY26 Q1 Results | Increase (decrease) vs. prior year | | :---------------- | :-------------- | :--------------------------------- | | Net Sales | $368.0M | (8)% | | Segment Profit | $101.3M | (12)% | | Segment Profit Margin | 27.5% | -130bps | - Volume/mix decreased net sales by 8 percentage points, driven by dog snacks and lower contract manufacturing sales from divested pet food brands[17] - Segment profit decrease was primarily due to unfavorable volume/mix and higher costs, partially offset by lower marketing spend[18] Sweet Baked Snacks Net sales for Sweet Baked Snacks decreased by 24% to $253.2 million, with a 10% decrease excluding divestitures, primarily due to volume/mix and net price realization, leading to a significant 54% decrease in segment profit to $34.2 million Sweet Baked Snacks Segment Performance | Metric | FY26 Q1 Results | Increase (decrease) vs. prior year | | :---------------- | :-------------- | :--------------------------------- | | Net Sales | $253.2M | (24)% | | Segment Profit | $34.2M | (54)% | | Segment Profit Margin | 13.5% | -880bps | - Excluding divestitures, net sales decreased 10%, driven by volume/mix (8 ppts) and net price realization (2 ppts) for snack cakes[19] - Segment profit decrease was primarily due to the impact of divested businesses, unfavorable volume/mix, and higher costs[19] International and Away From Home The International and Away From Home segment reported a 7% increase in net sales to $290.2 million, driven by a 9 percentage point contribution from net price realization, resulting in a significant 35% increase in segment profit to $65.5 million International and Away From Home Segment Performance | Metric | FY26 Q1 Results | Increase (decrease) vs. prior year | | :---------------- | :-------------- | :--------------------------------- | | Net Sales | $290.2M | 7% | | Segment Profit | $65.5M | 35% | | Segment Profit Margin | 22.6% | 470bps | - Net price realization contributed 9 percentage points to net sales, primarily from coffee and portion control products[20] - Segment profit increase was primarily due to higher net price realization and lower SD&A expenses, partially offset by higher costs[20] Corporate Information and Disclosures This section outlines the company's webcast details for Q1 results, highlights forward-looking statement risks, provides an overview of The J.M. Smucker Co. and its brands, and lists key contact information Financial Results Discussion and Webcast The company will post a pre-recorded management discussion, transcript, and supplemental materials on its investor website, followed by a live question-and-answer session with the CEO and CFO - A pre-recorded management discussion, transcript, and supplemental materials for Q1 FY26 results will be available on investors.jmsmucker.com at approximately 7:00 a.m. ET[21] - A live Q&A session with Mark Smucker (CEO) and Tucker Marshall (CFO) will be webcast at 9:00 a.m. ET, accessible on the investor website[21] Forward-Looking Statements This section contains forward-looking statements regarding projected financial results, which are subject to various risks and uncertainties that could cause actual results to differ materially, including integration of Hostess Brands, supply chain disruptions, and cost inflation - Forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially[22] - Key risks include successful integration of Hostess Brands, supply chain disruptions, cost inflation, changes in consumer preferences, regulatory changes, and IT system breaches[22] About The J.M. Smucker Co. The J.M. Smucker Co. is a North American food company offering diverse brands in categories like coffee, peanut butter, fruit spreads, frozen handhelds, sweet baked goods, dog snacks, and cat food, emphasizing quality products and responsible operations - The J.M. Smucker Co. offers a diverse family of brands across North America in categories such as coffee, peanut butter, fruit spreads, frozen handheld, sweet baked goods, dog snacks, and cat food[23] - Notable brands include Folgers, Dunkin', Café Bustelo, Jif, Uncrustables, Smucker's, Hostess, Milk-Bone, and Meow Mix[23] - The company is committed to producing quality products, operating responsibly and ethically, and delivering on its purpose to make a positive impact on society[23] Contacts Provides contact information for investor relations and media inquiries - Investor Relations contact: Crystal Beiting, Vice President, Investor Relations & FP&A[24] - Media contact: Abbey Linville, Vice President, Public Relations & Communications[24] Unaudited Condensed Consolidated Financial Statements The unaudited financial statements reveal a Q1 FY26 net loss of ($43.9) million, a 40% gross profit decrease, and a shift to negative operating cash flow, with total assets increasing and shareholders' equity decreasing Statements of Income The unaudited condensed consolidated statements of income show a net loss of ($43.9) million for Q1 FY26, a significant decline from a net income of $185.0 million in the prior year, with gross profit decreasing 40% and operating income decreasing 87% Condensed Consolidated Statements of Income | Metric | Three Months Ended July 31, 2025 (Millions) | Three Months Ended July 31, 2024 (Millions) | % Increase (Decrease) | | :--------------------------------------- | :------------------------------------------ | :------------------------------------------ | :-------------------- | | Net sales | $2,113.3 | $2,125.1 | (1)% | | Cost of products sold | 1,638.6 | 1,327.9 | 23% | | Gross Profit | 474.7 | 797.2 | (40)% | | Gross margin | 22.5% | 37.5% | | | Operating Income | 45.6 | 349.5 | (87)% | | Operating margin | 2.2% | 16.4% | | | Net Income (Loss) | ($43.9) | $185.0 | (124)% | | Net income (loss) per common share – assuming dilution | ($0.41) | $1.74 | (124)% | | Dividends declared per common share | $1.10 | $1.08 | 2% | Balance Sheets As of July 31, 2025, total assets were $17,741.9 million, a slight increase from April 30, 2025, driven by higher inventories and other current assets, while total liabilities also increased, primarily due to higher short-term borrowings, and total shareholders' equity decreased Condensed Consolidated Balance Sheets | Metric | July 31, 2025 (Millions) | April 30, 2025 (Millions) | | :-------------------------------- | :----------------------- | :------------------------ | | Total Current Assets | $2,401.9 | $2,146.6 | | Total Assets | $17,741.9 | $17,563.3 | | Total Current Liabilities | $2,953.9 | $2,652.0 | | Total Noncurrent Liabilities | $8,862.1 | $8,828.7 | | Total Shareholders' Equity | $5,925.9 | $6,082.6 | | Total Liabilities and Shareholders' Equity | $17,741.9 | $17,563.3 | - Inventories increased from $1,209.4 million to $1,386.0 million[28] - Short-term borrowings increased from $640.8 million to $951.6 million[28] Statements of Cash Flow The statements of cash flow show a shift from net cash provided by operating activities of $172.9 million in Q1 FY25 to net cash used for operating activities of ($10.6) million in Q1 FY26, with net cash used for investing activities increasing to ($197.9) million Condensed Consolidated Statements of Cash Flow | Metric | Three Months Ended July 31, 2025 (Millions) | Three Months Ended July 31, 2024 (Millions) | | :------------------------------------------ | :------------------------------------------ | :------------------------------------------ | | Net Cash Provided by (Used for) Operating Activities | ($10.6) | $172.9 | | Net Cash Provided by (Used for) Investing Activities | ($197.9) | ($172.4) | | Net Cash Provided by (Used for) Financing Activities | $178.0 | ($23.0) | | Net increase (decrease) in cash and cash equivalents | ($30.6) | ($22.5) | | Cash and Cash Equivalents at End of Period | $39.3 | $39.5 | - The change in operating cash flow was significantly impacted by the net loss in the current period and increased inventories[30] - Financing activities were positively impacted by a substantial increase in short-term borrowings[30] Supplemental Financial Data Supplemental data details a 3% decrease in Q1 FY26 SD&A expenses to $377.4 million and provides comprehensive net sales and segment profit breakdowns for all reportable business units Supplemental Schedule (SD&A) Total selling, distribution, and administrative (SD&A) expenses decreased by 3% to $377.4 million in Q1 FY26, representing 17.9% of net sales, with marketing expenses increasing while other SD&A components decreased Supplemental Schedule (SD&A) | SD&A Component | Q1 FY26 (Millions) | % of Net Sales (FY26) | Q1 FY25 (Millions) | % of Net Sales (FY25) | | :----------------------------- | :----------------- | :-------------------- | :----------------- | :-------------------- | | Marketing | $117.9 | 5.6% | $108.9 | 5.1% | | Selling | $70.9 | 3.4% | $75.9 | 3.6% | | Distribution | $69.2 | 3.3% | $71.5 | 3.4% | | General and administrative | $119.4 | 5.6% | $133.8 | 6.3% | | Total SD&A expenses | $377.4 | 17.9% | $390.1 | 18.4% | - Marketing expenses increased by $9.0 million, while general and administrative expenses decreased by $14.4 million[32] Reportable Segments (Detailed Tables) This section provides detailed net sales and segment profit data for each reportable segment, showing mixed performance with some segments experiencing sales growth while others faced declines in both sales and profit Net Sales by Segment | Segment | Q1 FY26 (Millions) | Q1 FY25 (Millions) | | :-------------------------------- | :------- | :------- | | U.S. Retail Coffee | $717.2 | $623.4 | | U.S. Retail Frozen Handheld and Spreads | $484.7 | $496.8 | | U.S. Retail Pet Foods | $368.0 | $399.7 | | Sweet Baked Snacks | $253.2 | $333.7 | | International and Away From Home | $290.2 | $271.5 | Segment Profit by Segment | Segment | Q1 FY26 (Millions) | Q1 FY25 (Millions) | | :-------------------------------- | :------- | :------- | | U.S. Retail Coffee | $134.2 | $172.6 | | U.S. Retail Frozen Handheld and Spreads | $114.3 | $119.0 | | U.S. Retail Pet Foods | $101.3 | $115.3 | | Sweet Baked Snacks | $34.2 | $74.4 | | International and Away From Home | $65.5 | $48.6 | - Total segment profit decreased from $529.9 million in Q1 FY25 to $449.5 million in Q1 FY26[34] Non-GAAP Financial Measures and Reconciliations This section explains the company's use of non-GAAP financial measures for performance evaluation and provides detailed reconciliations for Q1 FY26 results and the full-year FY26 outlook, including adjusted EPS and free cash flow Explanation of Non-GAAP Measures The company uses non-GAAP financial measures, such as adjusted gross profit, adjusted operating income, adjusted EPS, and free cash flow, to evaluate internal performance and enhance investor understanding by excluding items affecting comparability - Non-GAAP measures are used internally for performance evaluation, annual budgeting, and monthly operating result analysis, and by the Board for incentive compensation[35] - Exclusions from GAAP results include amortization, impairment charges, special project costs (divestiture, acquisition, integration, restructuring), gains/losses on divestitures, and changes in unallocated derivative gains/losses[36] - These non-GAAP measures supplement GAAP results and are not intended to replace them, but rather to facilitate comparison of past and present operations and liquidity[37] Q1 Fiscal 2026 Non-GAAP Reconciliations This section provides detailed reconciliations of GAAP to non-GAAP financial measures for Q1 FY26, with key adjustments including the change in net cumulative unallocated derivative gains and losses ($253.1 million) and special project costs to derive adjusted gross profit, operating income, and net income, resulting in an adjusted earnings per share of $1.90 Net Sales Reconciliation | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | Change (Millions) | % | | :--------------------------------------- | :-------- | :-------- | :------- | :-- | | Net sales | $2,113.3 | $2,125.1 | ($11.8) | (1)% | | Sweet Baked Snacks value brands divestiture | — | (15.7) | 15.7 | 1 | | Voortman® divestiture | — | (37.1) | 37.1 | 2 | | Foreign currency exchange | 0.2 | — | 0.2 | — | | Net sales excluding divestitures and foreign currency exchange | $2,113.5 | $2,072.3 | $41.2 | 2% | GAAP to Non-GAAP Reconciliation | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | | :--------------------------------------- | :------- | :------- | | Gross profit | $474.7 | $797.2 | | Adjusted gross profit | $743.2 | $832.5 | | Operating income | $45.6 | $349.5 | | Adjusted operating income | $370.3 | $447.9 | | Net income (loss) | ($43.9) | $185.0 | | Adjusted income | $203.4 | $259.5 | | Adjusted earnings per share – assuming dilution | $1.90 | $2.44 | EBITDA and Free Cash Flow | Metric | Q1 FY26 (Millions) | Q1 FY25 (Millions) | | :------------------------------------------ | :------- | :------- | | EBITDA (as adjusted) | $178.9 | $475.4 | | Free cash flow | ($94.9) | $49.2 | Full-Year Fiscal 2026 Outlook Reconciliations The company provides a reconciliation for its fiscal year 2026 guidance, projecting adjusted EPS of $8.50 - $9.50 after adjustments for derivative gains/losses, amortization, special project costs, and a pension plan termination settlement charge, with free cash flow projected at $975.0 million Adjusted Earnings Per Share Outlook Reconciliation | Metric | FY26 Low | FY26 High | | :--------------------------------------- | :------- | :------- | | Net income per common share – assuming dilution | $5.54 | $6.54 | | Adjustments (derivative, amortization, special project costs, pension charge, tax impact) | +$2.96 | +$2.96 | | Adjusted earnings per share | $8.50 | $9.50 | Free Cash Flow Outlook Reconciliation | Metric | FY26 (Millions) | | :------------------------------------ | :------- | | Net cash provided by operating activities | $1,300.0 | | Additions to property, plant, and equipment | (325.0) | | Free cash flow | $975.0 | - The adjusted EPS reconciliation includes a non-recurring pre-tax settlement charge related to the termination of a U.S. defined benefit pension plan[46]