• Net Sales: Increased 18% to $276.2 million.
• Sales Volume: Increased 24.5% to 91.2 million pounds.
• Gross Profit: Decreased by $10.5 million or 18.4% to $46.5 million.
• Gross Profit Margin: Decreased to 16.9% from 24.4%.
• Net Income: $11.7 million or $1 per diluted share, down from $17.6 million or $1.51 per diluted share.
• Operating Expenses: Decreased by $2.9 million, with a decrease to 10.7% of net sales from 13.9%.
• Interest Expense: Increased to $500,000 from $200,000.
• Inventory Value: Increased by $19.8 million or 11.3%.
• Consumer Distribution Channel Sales Volume: Increased 30.8%.
• Private Brand Sales Volume: Increased 36.1%.
• Branded Products Sales Volume: Increased 5.4%.
• Commercial Ingredients Channel Sales Volume: Increased 1.2%.
• Contract Manufacturing Channel Sales Volume: Increased 13.3%.

• Warning! GuruFocus has detected 2 Warning Sign with JBSS.

Release Date: October 31, 2024

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• Sales volume increased by 24.5% to 91.2 million pounds, showing strong growth across all distribution channels.
• The consumer distribution channel experienced its strongest quarterly sales volume growth in the past eight quarters.
• The company expanded its manufacturing footprint by leasing a 446,000 square foot facility in Huntley, Illinois, enhancing production capabilities.
• The OVH brand gained several rotations at a key club retailer, with new innovative snacks set to ship in December.
• Private label bar shipments increased significantly due to the Lakeville acquisition, indicating positive momentum in the snack and nutrition bar category.

Negative Points

• Gross profit decreased by $10.5 million or 18.4%, primarily due to competitive pricing pressures and higher commodity acquisition costs.
• Gross profit margin decreased to 16.9% from 24.4% in the previous year, reflecting margin compression.
• Net income for the first quarter was $11.7 million, down from $17.6 million in the same quarter of the previous year.
• Interest expense increased to $500,000 from $200,000 due to higher average debt levels.
• Fisher snack and trail mix shipments decreased by 12% in pounds, driven by distribution loss and non-repeating promotions.

Q & A Highlights

Q: Can you elaborate on the impact of the Lakeville acquisition on your sales volume and financial performance? A: Frank Pellegrino, CFO, explained that the Lakeville acquisition contributed approximately $40.5 million to net sales in the first quarter. Sales volume increased significantly, particularly in the consumer distribution channel, due to Lakeville's private brand bars. Excluding Lakeville, sales volume still saw a modest increase of 3.4% in the consumer channel.

Q: How are you addressing the margin compression experienced this quarter? A: Jeffrey Sanfilippo, CEO, stated that the company is focusing on operational efficiencies and optimizing the supply chain to return to normalized margins. They are also aligning costs with selling prices, especially in light of increased commodity costs for items like chocolate, cashews, and almonds.

Q: What strategic actions are being taken to support growth in the consumer distribution channel? A: Jeffrey Sanfilippo highlighted the expansion of their manufacturing footprint with a new facility in Huntley, Illinois, which will increase production capacity. Additionally, the company is expanding retail distribution, particularly in club channels, with innovative products and pack sizes.

Q: How is the company leveraging AI technology to enhance operations? A: Jeffrey Sanfilippo mentioned that JBSS has developed an internal team to assess AI applications for enhancing systems and processes. Several use cases have been identified, and projects will be executed in the coming fiscal quarters.

Q: What are the key drivers for the increase in private label sales volume? A: Frank Pellegrino noted that the increase in private label sales volume was driven by new peanut butter and nutrition bar distribution, as well as increased volumes of mixed nuts and snack and trail mix at a mass merchandising retailer due to retail pricing adjustments and rotational distributions.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.