PENNSAUKEN, NJ. — Economic and inflationary challenges early in the year gave way to consumers’ strong interest for “iconic brands and diverse offerings of fun and indulgent products” in the second quarter, said Daniel J. Fachner, president and chief executive officer of J&J Snack Foods.
Commenting in a May 2 conference call with analysts, Mr. Fachner said the company saw “marked improvements” in unit volumes in the second quarter of fiscal 2023, led by strong performances in soft pretzels, churros, frozen novelties and frozen beverages.
Net income at J&J Snack Foods in the second quarter ended March 25 totaled $6.87 million, equal to 36¢ per share on the common stock, up 110% from $3.27 million, or 17¢ per share, in the same period a year ago. Net sales increased 20% to $337.85 million from $281.51 million.
Mr. Fachner said frozen beverage brand Icee continued to gain share in the quick-service restaurant and fast-casual channels during the quarter. At the same time, expanded production capabilities have allowed J&J Snack to aggressively grow its SuperPretzel business. He said the company now has five new automated lines supporting growth opportunities in churros, pretzels and frozen novelties, with a sixth line expected to be added in the third quarter.
“This added capacity supports our aggressive plans to grow sales of our core products,” he said. “In addition, we are completing the geographic optimization of our distribution and warehousing network by consolidating to a handful of locations, including three new state-of-the-art distribution centers. The first RDC will open in June in Terrell, Texas, while the other two are expected to come online later this year and early next year. The opening of these new RDCs will allow us to go from 30-plus shipping locations to somewhere between 6 and 8 strategically located facilities and will significantly reduce our reliance on third parties for storage and logistics management.”
Foodservice operating income at J&J Snack Foods surged to $5.13 million from $536,000. Sales increased 24% to $218.28 million from $176.34 million. Within the foodservice division, sales of bakery products were $85.3 million, up from $83.97 million in the same quarter a year ago, while sales of churros climbed 43% to $24.92 million from $17.45 million. Sales of soft pretzels increased 28% to $55.49 million from $43.26 million. Sales of handhelds, meanwhile, decreased narrowly to $20.31 million from $20.51 million in the quarter.
In the retail supermarket segment in the second quarter, operating income was $487,000, down 56% from $1.09 million in the previous year’s second quarter. Sales increased nearly 14% to $46.36 million from $40.76 million. Within the retail supermarket segment, sales of soft pretzels rose 1.7% to $16.01 million. Sales of frozen novelties increased 9.8% to $20.77 million from $18.92 million, while sales of biscuits were virtually unchanged at $5.86 million, which compared with $5.69 million in the same period a year ago. Sales of handheld items rose sharply to $4.1 million from $1.07 million.
Mr. Fachner said J&J Snack plans to launch the Hola! Churros brand in the retail channel in 2023, with the first shipments to begin in September. So far, early returns on the product have been good in other channels, with sales growing 43% in the second quarter and 37% year-to-date.
“As America’s No. 1 producer of churros, we see significant near- and long-term growth opportunities of our branded products with major US food distributors, as well as the QSR, fast-casual and retail chains,” he said.
In the frozen beverages segment, J&J Snack posted operating income of $4.57 million, up 86% from $2.46 million in the same period a year ago. Sales increased 14% to $73.21 million.Overall, net income in the six months ended March 25 was $13.5 million, or 70¢ per share, down 6% from $14.36 million, or 75¢ per share, in the same period a year ago. Net sales were $689.2 million, up nearly 15% from $600 million.