Strong food service sales buoy J&J Snack earnings

by Eric Schroeder
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PENNSAUKEN, N.J. — Net income of J&J Snack Foods Corp. in the second quarter ended March 30 totaled $12,660,000, equal to 67c per share on the common stock, up 21% from $10,423,000, or 55c per share, in the same period of fiscal 2012.

Sales for the second quarter of fiscal 2013 were $201,326,000, up 6% from $189,554,000.

“Our sales growth of 5% this quarter before the benefit of acquisitions was strong, but concentrated on food service,” Gerald B. Shreiber, president and chief executive officer, said in an April 30 conference call with analysts. “Sales of soft pretzels in food service were extremely strong and include new pretzel products such as rolls, sticks, soft pretzel buns to casual dining restaurants and others.

“Frozen juice bars and Icee sales in food services were down as we continue to be impacted by our school food service business and the elimination of the U.S.D.A. School Food Service Program in this area of our business. We are still looking for traction in hand-held sales in food service, where sales were down 8% in the quarter. Churros also did exceptionally well, as we began selling to a major fast-food restaurant chain in the December quarter.”

Sales to food service customers increased $11,069,000, or 9%, in the second quarter, to $135,393,000. Soft pretzel sales to the food service segment increased 29% to $35,337,000, while frozen juices and Icees sales fell 13% to $10,122,000.

Bakery product sales, excluding biscuit and dumpling sales and fruit and fig bars, increased $2,720,000, or 4%, as sales increases and decreases were spread throughout the customer base.

Frozen beverage and related product sales increased 1% to $42,380,000, with beverage sales accounting for $25,183,000 of that total.

Mr. Shreiber said during the call that he is “hopeful” J&J is approaching a bottoming in the school food service business. He said the company has not lost any significant part of its school food service business and has been “quick,” “prompt” and worked “efficiently” to be on top of necessary reformulations.

“But this business, which is $60 million or so, a lot of our items are being restricted or are not on the menus because of one reason or the other,” he said. “And there’s even been a little bit of confusion within the education system on what they can sell and what they can’t sell. That, coupled with the budget constraints in there, caused us to be off rather significantly about the last year. We think we have bottomed out — we hope we have.”

Sales of products to retail supermarkets increased $119,000, or less than 1%, to $23,553,000 in the second quarter and essential were unchanged at $44,256,000 in the first half. Soft pretzel sales sold to supermarkets were up 19% in the second quarter to $10,046,000, and were up 12% to $18,624,000 for the six months on a unit volume increase of 18% for the quarter and 11% for the six months. Soft pretzel sales benefited from increased distribution of sweet cinnamon variety and perhaps from additional advertising, J&J Snack said.

For the six months ended March 30, net income was $22,886,000, or $1.22 per share, up 44% from $15,908,000, or 84c per share, in the same period a year ago. Net sales rose 8% to $392,734,000 from $362,240,000.
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