PENNSAUKEN, NJ. — Executives at J&J Snack Foods Corp. believe the company has “hit the bottom” and is now “bouncing back” after the company showed sequential improvement during the fourth quarter ended Sept. 26.
“Notwithstanding any kind of sharp impact from COVID-19, we expect to bounce perhaps even all the way back in the next couple of quarters,” Gerald B. Shreiber, chairman and chief executive officer, said during a Nov. 6 conference call with analysts.
Net income in the fourth quarter ended Sept. 26 totaled $6.58 million, equal to 35¢ per share on the common stock, down sharply from $26.07 million, or $1.38 per share, and compared with a loss of $12.65 million in the third quarter ended June 27.
Mr. Shreiber said the most recent quarter included approximately $1 million in costs for employee safety and increased COVID-19 compensation compared with $5 million in the third quarter. Additionally, J&J Snack closed a manufacturing facility in the Midwest during the quarter and recorded an impairment charge of $5.1 million in the third quarter and an additional $1.3 million in the fourth quarter. He said the company expects to reduce manufacturing overhead and distribution costs by about $7 million to $8 million annually as a result of the plant closing.
Despite the bounce back in operations during the fourth quarter it was still a difficult year overall for the Pennsauken-based company.
J&J Snack Foods posted income of $18.31 million in the year ended Sept. 26, equal to 97¢ per share on the common stock, down sharply from $94.82 million, or $5.04 per share, in fiscal 2019.
Net sales decreased 14% in fiscal 2020 to $1.02 billion from $1.19 billion in the same period a year ago.
And even though executives are optimistic about a rebound, they still remained cautious.
“Obviously, a lot of this is an unknown and depends on what opens up,” said Dennis Moore, chief financial officer. “I mean, as Dan (Fachner, president) has just said, locations are opening up such as movie theaters, schools to some extent, but it’s a slow process. And now with the significant increase in cases that we’re seeing across the country, we are hopeful for sure, that we’re going to get back to new world in like third and fourth quarter of the next year. But certainly, it is an unknown, and I think everyone understands that it’s an unknown.”
J&J Snack Foods posted operating income of $6.46 million in its foodservice segment in fiscal 2020, down 92% from $76.55 million in the same period a year ago. Sales decreased 16% to $618.89 million from $735.99 million. Within the foodservice division, sales of bakery products were $332.51 million, down 7% from $359.02 million the previous year, while sales of churros fell 29% to $46.88 million from $65.98 million, and sales of soft pretzels dropped 28% to $150.79 million from $209.23 million.
In the retail supermarket segment in fiscal 2020, operating income was $23.2 million, up 122% from $10.46 million in fiscal 2019. Sales rose 23% to $177.17 million from $144.59 million. Within the retail supermarket segment, sales of soft pretzels increased 36% to $49.16 million from $36.26 million. Sales of frozen juices and teas increased 20% to $88.74 million from $73.75 million, and sales of handheld items rose 13% to $12.3 million from $10.9 million. Sales of biscuits increased 12% to $28.32 million from $25.32 million.
With its foodservice business taking a hit due to the pandemic, Mr. Shreiber said J&J Snack Foods challenged its sales force and marketing people to develop new products and sales outlets.
“We’re starting to see some of the fruits of that labor now, including a recent launch of a product that Costco asked us to make for them,” he said. “And it’s the chicken bake, which is being sold in several hundred of the Costco side bar cafes on the outskirts of the store. And we have really high hopes for that. That could be as much as somewhere between $10 million and $25 million netting to us in sales.”
Chicken bakes are a handheld food stuffed with chicken, cheese, bacon and Caesar dressing.
In the frozen beverages segment, J&J Snack sustained a loss of $12.47 million, which compared with operating income of $29.95 million, and sales decreased 26% to $225.98 million from $305.61 million.
Mr. Shreiber said J&J Snack’s capital spending totaled $10 million in the fourth quarter and $58 million for the year, up slightly from last year as the company continued to invest in plant improvements and efficiencies and growing the business and looking at further manufacturing projects to improve efficiencies on an ongoing basis.