MOUNT LAUREL, NJ. — Theater channel weakness, the conclusion of limited-time churro volumes and continued cost inflation dragged down second-quarter performance at J&J Snack Foods Corp.

Despite the challenges, Daniel Fachner, president and chief executive officer, said the company is confident the foundation of the business is strong.

“We expect earnings to improve in the second half, driven by projected theater industry rebound, as well as actions (that) were taken to capture additional price increases and to grow volume,” Fachner said during a May 6 conference call.

Net income at J&J Snack Foods in the second quarter ended March 29 totaled $4.82 million, equal to 25¢ per share on the common stock, down 64% from $13.33 million, or 69¢ per share, in the same period a year ago. Net sales decreased 1.1% to $356.1 million from $359.73 million.

Following the release of financials, J&J Snack Foods’ stock price fell to a 52-week low of $112.39 on May 7, down 15% from a close of $131.84 on May 5, the day before earnings were issued, and down 38% from the 52-week high of $180.80 set back on Nov. 8, 2024.

Fachner said weakness in the theater channel was due to “underperforming movie releases,” but the company is optimistic that a strong summer lineup will provide tailwinds to its frozen beverage segment. He noted that industry forecasts suggest that the North American box office sales in the company’s third quarter may increase by 30% or more as compared to a year ago.

Weakness in the theater channel weighted on foodservice sales at J&J Snack Foods during the second quarter.

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Foodservice operating income at J&J Snack Foods plummeted 84% to $1.25 million from $7.93 million. Sales decreased 1.8% to $226.05 million from $229.99 million. Within the foodservice division, sales of bakery products were $94.01 million, up 2.3% from $91.91 million in the same quarter a year ago, while sales of handhelds rose 15% to $22.36 million from $19.5 million. Sales of churros fell 19% to $25.06 million from $30.83 million, while sales of soft pretzels eased 8% to $50.01 million from $54.33 million.

Fachner said the foodservice segment felt the impact of the loss of a limited-time churro offering with a major quick-service restaurant chain during the quarter.

“This year, we successfully added new churro volumes, and while these additions have not fully offset the strong performance of last year's LTO, we remain encouraged by the compelling opportunity with churros,” he said. “I want to reiterate that we view LTOs as a valuable platform to engage our customers and create opportunities for long-term menu items.”

Although pretzel sales declined in the foodservice segment during the quarter, Fachner said J&J Snack’s market share improved by 1.4 points overall and by 4.4 points within Bavarian pretzels as demand for that type of pretzel continues to grow.

“Bavarian pretzels remained a standout performer within the category, making it a key area of focus and a significant opportunity to leverage our leadership position in pretzels,” he said.

Finally, Fachner said the foodservice segment was pressured by continued chocolate cost inflation, namely in J&J Snack’s bakery business.

“While we did take incremental pricing in the quarter across our portfolio, it did not fully offset cost inflation,” he said. “We are continuing to implement price increases across the portfolio selectively during the third quarter. We will continue to be surgical as we implement price increases to protect volume for the long term.”

In the retail supermarket segment in the second quarter, operating income fell 46% to $2.77 million from $5.11 million in the previous year’s second quarter. Sales increased 1.8% to $52.85 million from $52.89 million. Within the retail supermarket segment, sales of frozen novelties increased 15% to $27.15 million from $23.68 million. Meanwhile, sales of soft pretzels decreased 2.8% to $16.01 million from $16.45 million, and sales of biscuits fell 5.1% to $5.89 million from $6.21 million. Sales of handheld items dropped 29% to $5.15 million from $7.19 million.

“Overall, we are pleased with our retail business performance and continue to invest behind the brands accordingly,” Fachner said. “I’d like to share more about the recently announced enhancements to our flagship Super Pretzel recipe and packaging for retail. In response to consumer feedback, we made small but meaningful recipe updates to give our Super Pretzel a softer texture and a more robust Bavarian style flavor. The new recipe positions the product well given that Bavarian style pretzels are some of the fastest growing products in the pretzel category.

“We also refreshed the retail packaging, introduced an omnichannel marketing plan to support the launch, and we’ll convert some of our top foodservice SKUs to the new recipe this summer, including the pretzels that consumers find at baseball games and amusement parks. We’re very excited about this update to the Super Pretzel brand, and we know that consumers will be pleased with the new enhancements as well.”

In the frozen beverages segment, J&J Snack posted operating income of $2.01 million, down 59% from $4.86 million in the same period a year ago. Sales were virtually flat, easing to $76.2 million from $76.85 million.

Overall, net income in the six months ended March 29 was $9.97 million, or 51¢ per share, down 52% from $20.611 million, or $1.06 per share, in the same period a year ago. Net sales were $718.7 million, up 1.5% from $708.04 million.