ORRVILLE, OHIO — Between the acquisition of Hostess Brands, Inc., and the divestiture of some pet food brands as well as Sahale Snacks earlier this year, there was a lot of “noise” in the J.M. Smucker Co.’s second-quarter financial performance. But coming through loud and clear were strong results in its US Retail Consumer Foods business unit and especially from the company’s Uncrustables brand.
US Retail Consumer Foods sales rose 7% during the quarter ended Oct. 31 to reach $464.3 million and segment profit rose 28% to $128.5 million.
“Net sales for Uncrustables frozen sandwiches grew 22%, driven by volume/mix growth,” said Mark T. Smucker, chairman, president and chief executive officer, during a Dec. 5 conference call with securities analysts. “Total company net sales of Uncrustables sandwiches were over $200 million in the quarter. We anticipate strong growth for the balance of the fiscal year, as the total brand is expected to grow net sales approximately 20% for the full year to over $800 million.
“This quarter, the Uncrustables brand increased household penetration faster than any other competitor in the frozen handheld category. We anticipate continued household penetration growth as we turn on new demand drivers, including advertising and in-store activations.”
Mr. Smucker added that construction of the company’s third Uncrustables plant in McCalla, Ala., is ahead of schedule and now expected to begin production in calendar 2024.
“The expanded capacity enables significant runway for continued growth, and we remain confident in growing the brand to $1 billion in annual net sales by the end of fiscal year 2026,” he said.
The J.M. Smucker Co.’s net income for the quarter was $194.9 million, equal to $1.91 per share on the common stock, and up 2% over the $191.1 million, or $1.79 per share, the company earned during the same quarter of the previous year.
Quarterly sales fell 12% to $1.94 billion from $2.21 billion the year before and reflected the impact of lost sales due to the divestiture of some pet food brands. Excluding noncomparable sales in the prior year as well as $2.5 million of unfavorable foreign currency exchange, sales increased $121 million, or 7%, according to the company.
In US Retail Coffee, the company’s largest business unit, sales fell 3% to $685.7 million and segment profit fell 9% to $171 million. Management said the sales decline primarily was driven by lower list prices as the company passed through lower coffee costs to consumers during the quarter.
Business unit profit was affected by a $39.1 million impact from the termination of a supplier agreement. The company said excluding the item, segment profit increased during the quarter.
In US Retail Pet Foods, sales fell 39% to $464 million and segment profit fell 19% to $97.2 million. Both were impacted by the divestment of some pet food brands earlier in the year.
International and Away From Home sales rose 9% during the quarter and segment profit rose 45% to $60.2 million. Volume/mix increased net sales by 7 percentage points for the combined businesses, primarily driven by Uncrustables and coffee products, according to the company. Net price realization contributed 5% to net sales, primarily driven by list price increases across the majority of the portfolio, partially offset by increased trade spend.
The company lowered its outlook for the rest of fiscal 2024 with sales now expected to be in a range of 8.5% to 9% compared to last year rather than 8.5% to 9.5%. Adjusted earnings per share are expected to be in a range of $9.25 per share to $9.65 per share, down from the previous range of $9.45 to $9.85.
Items affecting the lower sales outlook included $1.5 billion of net sales in the prior year related to the divested pet food brand and $23.7 million related to the sale of Sahale Snacks. On the positive side, Smucker is expecting Hostess Brands to generate approximately $650 million during the rest of its current fiscal year.
“Our comparable net sales expectations have not changed for the base business,” said Tucker H. Marshall, chief financial officer. “This demonstrates the continued momentum of our business and brands and reflects volume/mix benefits across all three of our US Retail segments and our International and Away From Home business.”
Net income for the first six months of fiscal 2024 rose 26% to $378.5 million, or $3.70 per share, compared with $300.9 million, or $2.82 per share, the company earned the year before.
Sales for the period fell 8% to $3.74 billion from $4.08 billion the year before.