J. M. Smucker(SJM) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics - Net sales increased by 17% in the quarter, exceeding expectations, with comparable net sales up 2% [39] - Adjusted gross profit increased by $129 million (17%) compared to the prior year, driven by favorable volume/mix and higher net price realization [42] - Adjusted operating income increased by$ 105 million (27%), reflecting higher adjusted gross profit and the lapping of a prior-year charge [43] - Adjusted earnings per share (EPS) for the quarter was $2.76, a 7% increase versus the prior year [45] - Free cash flow for the quarter was$ 317 million, compared to $28 million in the prior year [54] - The company anticipates full-year adjusted EPS to be in the range of$ 9.70 to $10.10, reflecting a$ 0.10 increase at the mid-point of the guidance range [62] Business Line Performance - Uncrustables: Net sales grew by 16%, driven by advertising, distribution gains, and new merchandising investments. Full-year net sales for the brand are expected to exceed $900 million [8][11] - **Pet Foods**: Milk-Bone and Meow Mix brands contributed positive volume/mix growth, with Milk-Bone showing mid-single-digit growth and Meow Mix achieving high-single-digit growth [12][13] - **Coffee**: Café Bustelo grew net sales by 20%, continuing its double-digit growth momentum. The Folgers brand also saw a 5% increase in net sales [15][46] - **Hostess Brand**: Net sales were below expectations due to consumer spending selectivity and underperformance in distribution and merchandising. The company is taking actions to return the brand to growth [16][17][18] Market Performance - **U.S. Retail Coffee**: Net sales increased by 3%, driven by higher net price realization, with Café Bustelo growing 20% and Folgers growing 5% [29][46] - **U.S. Retail Frozen Handheld and Spreads**: Net sales increased by 5%, with Uncrustables and Jif brands driving growth [31][48] - **U.S. Retail Pet Foods**: Reported net sales decreased by 4%, but excluding divested brands, net sales increased by 1%, driven by Meow Mix and Milk-Bone [32][50] - **Away From Home**: Comparable net sales grew by 8%, driven by Uncrustables and portion control products [35][52] Strategic Initiatives and Industry Competition - The company is prioritizing key growth platforms, including Uncrustables, Pet Foods, Coffee, and Hostess, with a focus on innovation, distribution, and marketing [7][8][16] - The Hostess brand is undergoing a modernization effort, including new packaging, marketing campaigns, and distribution expansion to drive growth [20][21][22] - The company is leveraging cross-promotional opportunities between Hostess and legacy Smucker brands to drive revenue synergies [25][26] - The divestiture of the Voortman business aligns with the strategy to focus on core growth opportunities [24] Management Commentary on Operating Environment and Future Outlook - The company is operating in a dynamic consumer environment but remains resilient, with strong demand for its iconic brands [7] - Inflationary pressures and reduced discretionary spending are impacting certain categories, such as sweet baked goods and pet snacks [17][33] - The company is confident in its ability to deliver long-term sustainable growth and generate over$ 1 billion in free cash flow annually [36] - The company plans to prioritize debt reduction, targeting a leverage ratio of 3 times or below by the end of fiscal year 2027 [56] Other Important Information - The company successfully started production at its third Uncrustables manufacturing facility in McCalla, Alabama, which will support further growth [8] - The company is launching new products and seasonal offerings, such as Peanut Butter and Raspberry spread Uncrustables, to drive consumer trial and awareness [9][10] - The company is refreshing the Meow Mix brand with new packaging and innovation to elevate the mealtime experience for cats and pet parents [13][14] Q&A Session Summary - No specific questions or answers were provided in the transcript [67]