J. M. Smucker(US:SJM)2024-02-27 20:25Financial Data and Key Metrics Changes - In the third quarter, comparable net sales increased by 6%, driven by the Pet Foods segment and growth in the Away From Home business and Frozen Handheld and Spreads segment [26] - Adjusted earnings per share increased by 12% to $2.48, reflecting improved gross profit margin and favorable selling, distribution, and administrative expenses [38][47] - Free cash flow for the third quarter was $250 million, down from $443 million in the prior year, primarily due to increased working capital needs and lower net income adjusted for noncash items [58] Business Line Data and Key Metrics Changes - U.S. Retail Pet Foods net sales decreased by 39% year-over-year, but increased by 20% when excluding noncomparable sales from divested brands [51] - The Milk-Bone brand grew net sales by double-digits, outpacing the category growth rate [6] - The Sweet Baked Snacks segment, reflecting the acquired Hostess business, contributed net sales of $300 million and segment profit of $68 million, in line with expectations [40] Market Data and Key Metrics Changes - The Away From Home business saw a 13% increase in net sales, led by a 33% growth for Uncrustables sandwiches [8] - International business net sales increased by 3%, primarily driven by Carnation milk and Uncrustables sandwiches in Canada [8] - The coffee category remains strong, with over 70% of coffee consumption occurring at home [5] Company Strategy and Development Direction - The company is focused on integrating and growing the Sweet Baked Snacks business while achieving transformation and cost management goals [22] - The acquisition of Hostess and divestitures of Sahale Snacks and Canadian condiment businesses are part of the strategy to concentrate resources on faster growth opportunities [28] - The company aims to grow Uncrustables to $1 billion in annual net sales by the end of fiscal year 2026, supported by the construction of a new manufacturing site [30] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in adapting to consumer preferences and sustaining positive momentum in the business [33] - The company anticipates net sales guidance of approximately $8.22 billion for the fiscal year, reflecting a decline of about 3.6% compared to the prior year [41] - Adjusted earnings per share for the full year are projected to be in the range of $9.45 to $9.65, reflecting a $0.10 increase at the mid-point of the range [42] Other Important Information - The company completed the expansion of its second Uncrustables sandwiches plant, which has improved distribution and in-stock levels [1] - The new bakery in Arkadelphia, Arkansas, began operations, enhancing capacity for Donettes and cake products [45] - The company expects fourth quarter adjusted earnings per share to decline by a mid-teen percentage, primarily due to pre-production expenses related to Uncrustables [56] Q&A Session Summary Question: What are the expectations for the Uncrustables brand growth? - The company remains confident in growing Uncrustables to $1 billion in annual net sales by the end of fiscal year 2026, supported by new manufacturing capacity [30] Question: How is the integration of Hostess progressing? - The integration of Hostess is progressing well, with both Hostess and Voortman brands gaining volume share in the quarter [44] Question: What is the outlook for the Pet Foods segment? - The Pet Foods segment is expected to continue strong performance, with Milk-Bone and Meow Mix brands showing significant growth [52]