Food service strength drives J&J Snack results

by Eric Schroeder
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J&J Snack Foods soft pretzels
Increased sales of soft pretzels benefited J&J Snack Foods in fiscal 2017.
 

PENNSAUKEN, N.J. — Strong performance within the company’s food service business boosted overall earnings and sales at J&J Snack Foods Corp. in fiscal 2017.

Net income in the year ended Sept. 30 totaled $79,174,000, equal to $4.23 per share on the common stock, up 4% from $75,975,000, or $4.07 per share, in fiscal 2016. Net sales increased 9% to $1,084,224,000 from $992,781,000. Fiscal 2017 included 53 weeks, compared to 52 in fiscal 2016.

Gerald B. Shreiber, president and chief executive officer, said strength within the company’s food service business keyed growth during the fourth quarter and full year.

Gerald Schreiber, J&J Snack Foods Corp.
Gerald Shreiber, president and c.e.o. of J&J Snack Foods

“Food service, without the extra week and without Hill & Valley and Labriola sales, were up 11% for the quarter and 5% for the year,” Mr. Shreiber said during a Nov. 10 conference call with analysts. “Sales to food service customers increased 30% for the quarter and our sales increase of 19% without Hill & Valley and Labriola was due to increased sales of soft pretzels, which were up double digit, handhelds, which were up 81%, churros up 16%, bakery products up 20%, frozen juice bars and ices up 15%, and funnel cake up 33%.

“We had an exciting year in food service. For the year, food service sales were up 13%, and without Hill & Valley and Labriola were up 7% with increased sales of soft pretzel up 5%, churros up 10%, handhelds up 35%, bakery products and funnel cake up 7% and 4%, respectively.”

J&J Snack Foods churros
J&J Snack Foods' food service churro sales increased 10%.
 

Operating income in the food service unit totaled $81,208,000 in the year ended Sept. 30, up 6% from fiscal 2016.

In a July 25 conference call with analysts, Mr. Shreiber was peppered with questions about the performance of Rock Island, Ill.-based Hill & Valley, a maker of pre-baked cakes, cookies, pies, muffins and other desserts for retail in-store bakeries. Despite generating operating income that was significantly off from projections during the third quarter, Mr. Shreiber indicated then that it wasn’t panic time. In the fourth quarter, a turnaround did take place, with Hill & Valley generating a 3% operating margin.

During the Nov. 10 conference call, Mr. Shreiber updated analysts by describing Hill & Valley as “a nice complementary business to our other products.”

Labriola Baking pretzel rolls, J&J Snack Foods
J&J Snack Foods acquired Labriola Baking Co. in August.
 

“The business itself is improving,” he said.

Another transaction drawing interest from analysts was J&J Snack Foods’ August acquisition of Labriola Baking Co., Alsip, Ill., a producer of bread products and artisan soft pretzels. Labriola Baking was founded as a local Chicago-area bakery in 1993 and has grown into a national supplier of prebaked bread, rolls and soft pretzels for in-store bakery and food service channels.

“I tried to buy (Labriola) about five or six years ago,” Mr. Shreiber said. “Quite frankly, we put in a bid, and we were outbid. It went for something significantly more than we wanted to pay at that time. That investment group got in trouble, they gave it to one of you guys to sell it and we were able to buy it at a fraction of what it was originally. … We think that that’s going to be perhaps a shining star for us in the future. They make a terrific product both on a soft pretzel standpoint and some specialty, that’s going to do well.” 
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