Release Date: February 27, 2025

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

Positive Points

• JM Smucker Co (NYSE:SJM) delivered adjusted earnings per share that exceeded expectations, leading to an increase in full-year adjusted earnings per share and free cash flow guidance.
• The Uncrustables brand experienced a 15% growth in net sales, driven by national advertising, distribution gains, and new merchandising investments.
• Cafe Bustelo brand continued its momentum with a 15% growth in net sales, gaining dollar and volume share in every segment it competes in.
• The company is expanding its product offerings and distribution channels, such as launching new roast profiles for Cafe Bustelo and expanding Uncrustables into convenience stores.
• JM Smucker Co (NYSE:SJM) is focused on debt reduction, planning to pay down over $800 million this fiscal year and $500 million annually in the next two years, aiming for a leverage ratio at or below 3 times net debt to EBITDA by fiscal year 2027.

Negative Points

• Supply chain disruptions negatively impacted results, particularly in the Milk-Bone and Meow Mix brands, leading to a $30 million impact in the third quarter.
• The Sweet Baked Snacks segment underperformed due to inflationary pressures and diminished discretionary income, leading to a $794 million impairment charge related to goodwill.
• Net sales decreased 2% in the third quarter, with comparable net sales decreasing 1%, driven by declines in coffee and dog snacks.
• The Hostess brand faced challenges in distribution, merchandising, and competition, causing underperformance in consumer shopping channels.
• The company revised its full-year net sales expectations due to supply chain disruptions, continued softness in the Sweet Baked Snacks segment, and unfavorable foreign currency exchange impacts.

Q & A Highlights

• Warning! GuruFocus has detected 3 Warning Signs with SJM.

Q: Can you elaborate on the supply chain disruptions and their impact on the quarter's results? A: Mark Smucker, Chairman of the Board, President, Chief Executive Officer, explained that supply chain disruptions negatively impacted results, particularly in the Milk-Bone and Meow Mix brands. However, these issues have been resolved, and the company anticipates returning to full distribution in the fourth quarter.

Q: What are the key growth drivers for the Uncrustables brand? A: Mark Smucker highlighted that the Uncrustables brand grew net sales by 15% due to a national advertising campaign, distribution gains, and new merchandising investments. The brand is expanding into convenience stores and has launched new products like the Peanut Butter and Raspberry Spread sandwich, which exceeded expectations.

Q: How is the CafA Bustelo brand performing, and what are the future plans? A: Mark Smucker noted that CafA Bustelo is one of the fastest-growing brands in the at-home coffee category, with a 15% increase in net sales. The company plans to expand the brand nationally, introduce new roast profiles, and launch a single-serve ready-to-drink format next fiscal year.

Q: What actions are being taken to address the challenges faced by the Hostess brand? A: Mark Smucker stated that the Hostess brand is underperforming due to inflationary pressures and distribution issues. The company is focusing on stabilizing the brand through leadership changes, expanding distribution, driving innovation, and launching new marketing campaigns.

Q: Can you provide more details on the financial outlook for fiscal year 2025? A: Tucker Marshall, Chief Financial Officer, mentioned that the company expects full-year net sales to increase by approximately 7.25%, with adjusted earnings per share anticipated to be in the range of $9.85 to $10.15. The company also projects free cash flow of approximately $925 million.

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