ORRVILLE, OHIO — The J.M. Smucker Co. announced it was coming back faster than anticipated from the impact of the Jif peanut butter product recall it sustained in the fourth quarter of fiscal 2022. The company originally projected a 90¢ unfavorable impact to adjusted earnings per share related to the recall.
“We came into the fiscal year with a 90¢ impact associated with the Jif peanut butter recall,” Tucker H. Marshall, chief financial officer, said in an earnings call with securities analysts on Aug. 23. “That estimate is now 80¢. We did have the opportunity to come back faster both from a manufacturing standpoint and then beginning to refill the shelves at the respective retailers, and so we were able to benefit, which enabled us to reduce from 90¢ to 80¢.”
Mr. Marshall said the company was able to recover 65¢ of the impact in the first quarter of fiscal 2023 ended July 31. That figure included a meaningful insurance recovery. Smucker still will face a 15¢ per share exposure in the second and third quarters of 2023 related to the recall, but “nothing material beyond the first quarter,” Mr. Marshall said.
In addition, the company took pricing actions in the third and fourth quarters of fiscal 2022.
“We are continuing to experience cost inflation that is having a mid-to-high teens impact on our cost of products sold,” Mr. Marshall said. “We still anticipate 15 points of pricing for the full fiscal year. There is not a material change to that from our original guidance. And again, what we are carrying in from fiscal ‘22 is about mid-single digits and actions that we’ve taken for the full benefit of fiscal ‘23 is high single digits as well on the pricing front.”
Net income at J.M. Smucker in the first quarter ended July 31 was $110 million, equal to $1.03 per share on the common stock, down 29% from $154 million, or $1.42 per share, in the same quarter a year ago.
First-quarter sales of $1.87 billion were flat compared with $1.86 billion in the first quarter of fiscal 2022.
In US Retail Pet Food, the company’s largest business unit, sales were $729 million, up 13% from $648 million in the same quarter a year ago. Segment profit rose 51% to $120 million during the quarter.
The company said the 51% profit increase in the Pet Food segment was due to, “higher net price realization and increased commodity and ingredient, packaging, and manufacturing costs and lower marketing spend, partially offset by a decreased contribution from volume/mix.”
US Retail Coffee sales were $598 million, up 10% from $543 million in the year-ago quarter. Business unit profit fell 4% to $146 million.
“The coffee story is one of cost inflation that has needed to be recovered on a dollar-for-dollar basis,” Mr. Marshall said. “And this first quarter is our largest cost component or cost basket, so that is really what is driving the year-on-year margin pressure. But as we move sequentially through the balance of the fiscal year, we would anticipate that our coffee margins improve. But getting them back to the historical 30-plus percent level will still take us some time as we navigate this inflationary environment.”
Mark Smucker, president and chief executive officer, commented further on the effect of pricing actions on the coffee segment.
“Although we did anticipate some elasticity in the quarter, those were largely as expected as we’re now seeing our competitors follow in pricing,” he said. “As we move forward, we would continue to monitor very closely consumer behavior, but we’re encouraged by the fact that over 70% of cups consumed are still consumed at home.”
In the US Retail Consumer Foods business unit, sales were $311 million, a decrease of 29% from $436 million in the first quarter of fiscal 2022.
US Retail Consumer Foods segment profit was $55 million, down 54% from $118.7 million. Smucker said the drop primarily reflected the unfavorable impact of the Jif peanut butter product recall and the noncomparable segment profit in the prior year related to the divested natural beverage and grains businesses.
International and Away From Home sales were $235 million, up 2% from $231 million in the same quarter a year ago. Segment profit was $17 million, a decrease of 50% from $33 million. Profits in the segment were hit by the effects of the Jif peanut butter product recall and higher commodity costs, the company said.
“Our first-quarter results reflect a strong start to the fiscal year, demonstrating our operational excellence and strength of our strategy,” Mr. Smucker said in prepared remarks released with the company’s first-quarter financial results. “Our teams have done outstanding work to manage headwinds from cost inflation, industry-wide supply chain challenges, and the Jif peanut butter recall.
“Due to the better-than-expected first-quarter results and sustained momentum for our trusted brands, we are raising our net sales, adjusted earnings per share, and free cash flow expectations for this fiscal year.”The company said it anticipates full-year adjusted earnings per share to be in the range of $8.20 to $8.60, a 4%, increase from its previous guidance.