ORRVILLE, OHIO – Strip away comparisons to sales from divested businesses, and the J.M. Smucker Co. had a better-than-expected second quarter. Quarterly adjusted sales for US Retail Coffee, US Retail Consumer Foods and US Retail Pet Food business units rose 8%, 9% and 7%, respectively. The positive momentum prompted the company to raise its full-year guidance.
Underpinning the quarterly sales growth were price increases and increases in volume and mix for each business unit.
“In the second quarter, net sales increased 1% versus the prior year,” said Mark T. Smucker, president and chief executive officer. “Excluding noncomparable net sales from divestitures and foreign exchange, net sales grew 8%, with every business outperforming our expectations. Organic net sales grew 6% on a two-year CAGR basis, demonstrating growth across all three of our US Retail segments.”
Net income for the quarter ended Oct. 31 was $206 million, equal to $1.90 per share on the common stock, down from $231 million, or $2.02 per share, the year before.
Quarterly sales were $2.05 billion versus $2.03 billion in fiscal 2020.
Items affecting earnings included increased commodity, manufacturing, transportation and packaging costs, as well as costs associated with the Crisco and Natural Balance divestitures.
US Pet Food sales were $702 million. Adjusted for the divestiture, sales rose 7% during the quarter.
“Growth was mostly driven by our cat food and market-leading dog snacks businesses, with net sales increasing 9% and 7%, respectively, while dog food grew 1%,” Mr. Smucker said.
US Retail Coffee sales were $645 million and driven by all brands in Smucker’s at-home coffee portfolio.
“Our portfolio gained over a half point of dollar share in the quarter, more than any other manufacturer, as we outpaced the category in all segments, including mainstream, premium, one cup and instant,” Mr. Smucker said.
Sales growth was led by the Dunkin and Café Bustelo brands, which grew 10% and 15%, respectively, in retail sales. K-Cup growth grew at 2.5x the category rate and gained over a point of share in the quarter, according to the company.
“In our Consumer Foods business, we delivered strong results across all categories,” Mr. Smucker said. “Comparable net sales grew 9%. Growth was driven by another quarter of net sales growth across all our key brands, including Smucker’s Uncrustables frozen sandwiches, Jif peanut butter, and Smucker’s fruit spreads and toppings.”
Total US Retail Consumer Foods sales were $441 million during the quarter. On Nov. 18, J.M. Smucker announced plans to build a new Uncrustables manufacturing plant in McCalla, Ala. During a question-and-answer session with securities analysts, Mr. Smucker expanded on the opportunity the company sees in the brand.
“The investment in the Alabama facility, which we will break ground on in the next couple of months, will support, obviously, further growth to what we believe could be north of $1 billion (in sales),” he said. “The reason to believe is there's just a ton of runway on this brand. I mean household penetration, No. 1, is still low. It’s only about 11%.
“No. 2, we have not invested significantly in marketing. And, so, we have not turned on any significant consumer spend.”
Mr. Smucker added he sees opportunities in away-from-home and Canada. Limiting opportunities has been manufacturing constraints that the company hopes will be alleviated by the building of the Alabama plant and expansion of a plant in Longmont, Colo.
“So, if you think about all of those plus the fact that we haven’t done any really meaningful innovation, we just think there’s a ton of growth opportunities and momentum for that brand,” he said.
The strong quarterly results led management to raise Smucker’s full-year guidance. Adjusted earnings per share are now expected to be in a range of $8.35 to $8.75 compared with earlier guidance of $8.25 to $8.65 per share.
Net sales are expected to range from down 0.5% to up 0.5% compared to the prior year. Earlier guidance had sales down 2.5% to down 1.5% for the year. On a comparable basis, the company said net sales are expected to increase approximately 4.5%.
Mr. Smucker said he believes the company has a tailwind for the rest of the year, with elevated at-home consumption continuing and the belief a hybrid work model is developing that will keep more people home than before the pandemic.
“Since we clearly are breakfast and lunch-oriented, that is definitely going to continue to support our business as well as, as you know, focusing on pet snacks,” he said. “We’ve just had some very nice results supported by both our execution and … what we view as a persisting tailwind of at-home consumption.”