JM Smucker has blamed a “cautious consumer” on its sweet baked snacks and pet food segments performing below expectations in the opening quarter of its financial year.
“Consumers continue to be selective in their spending, a trend that is largely driven by inflationary pressures and diminished discretionary income,” CEO and chairman Mark Smucker said on Wednesday (28 August) said.
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“These trends have impacted the sweet baked goods category and caused a reduction in convenience store foot traffic.”
He noted the drop in convenience store sales has “disproportionately” impacted sales of the Hostess brand, which JM Smucker bought last year as part of its $5.6bn purchase of US snack-foods business Hostess Brands.
The Jif peanut butter maker reported that its sweet baked goods division generated $333.7m in net sales in the first quarter of its fiscal 2025. Profit for the segment reached $74.4m.
It did not provide prior year comparisons for the segment due to “differences in reporting periods and certain financial measures under previous ownership”.
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By GlobalDataWe continue to see a lot of bright spots in the snacking.
JM Smucker CEO and chairman Mark Smucker
However, Smucker told analysts: “I would just, maybe from a macro perspective, highlight that snacking has continued to be a very strong category overall in all of its forms and … has continued to outpace total food.
“We continue to see a lot of bright spots in the snacking. Consumers are still snacking twice a day or about 70% of consumers are eating two snacks a day.”
JM Smucker lowered its forecast for how much the company sees its net sales growing across the year as a whole. It now sees growth of between 9.5% and 10.5%, down from growth of 8.5% and 9.5%.
The company’s guidance for its adjusted earnings per share guidance fell from a range of $9.80 to $10.20 down to $9.60 to $10.00.
CFO Tucker Marshall told analysts the 1% drop in the midpoint of the newly guided growth range represents approximately $80m.
He said: “About half of that or $40m is coming through sweet baked snacks, of which $25m is in the first half of the year and the balance being in the back half of the year.
“Really, we’re seeing the softness… coming through the overall category, but also through the specific channel of convenience.”
Smucker remains upbeat on pet food
The US group’s pet-food segment, with brands like Milk-Bone and Meow Mix, was another driver behind the adjusted forecast, as net sales dropped 9% to $399.7m for the three-month-period.
JM Smucker listed “inflationary pressures” as the main reason behind the slowdown in the category, but the chief executive said there were reasons for optimism.
“Our total dog snacks was down in the quarter, primarily because our soft and chewy business was a little bit soft but Milk-Bone actually did see some modest growth to the tune of 2% in volume.”
JM Smucker said profit from the pet-food segment jumped 42% year-on-year to $115.3m.
Marshall said: “It’s nice to see the strength of profitability in our pet portfolio and the strong performance for the quarter. What is supporting that is just the positive volume/mix momentum coming across the portfolio through both pet snacks and cat food.
“You’re seeing a stabilisation in the supply chain, particularly within our cat food portfolio. You’re seeing the benefits of our cost and productivity savings, the initial steps to begin realising or removing stranded overhead. And so it is definitely a good first quarter.”
For the three months ended 31 July 2024, JM Smucker generated total net sales of $2.1bn, up 18% year-on-year.
Operating income was up 15% at $349.5m while adjusted earnings per share (assuming dilution) rose 10% to $2.44.
Robert Moskow, an analyst at TD Cowen, said in an investors note: “While it’s tough to embrace a stock after a guide cut, we feel the new guide more accurately reflects the headwinds facing JM Smucker and largely de-risks the year.”
