ORRVILLE, OHIO — Lower coffee prices and softer demand for pet food contributed to a decline in net sales for The J.M. Smucker Co. in the recent quarter. Still, earnings per share exceeded expectations, said Mark Smucker, chief executive officer.
Net income in the first quarter ended July 31 was $170 million, equal to $1.46 per share on the common stock, up 25% from $136.4 million, or $1.14 per share, in the prior-year period. Net sales fell 7% to $1,815.8 million from $1,952 million. The decline in sales also reflected the impact of Smucker’s divestiture of its U.S. canned milk business.
|Mark Smucker, c.e.o. of The J.M. Smucker Co.|
“While net sales fell slightly short of our projection for the quarter, earnings per share exceeded our expectations,” Mr. Smucker said during an Aug. 23 earnings call with financial analysts. “This was mostly attributable to higher-than-anticipated segment profit for coffee and lower-than-anticipated spending in a number of areas.”
For the full year, the company now expects net sales to decrease by 2% to 3% from the prior year, reflecting the U.S. canned milk divestiture and a reduced net sales forecast for the pet food business, which Smucker acquired early last year.
“I just want to reiterate our confidence in the business,” Mr. Smucker said of pet foods. “We believe in the business.”
During the quarter, U.S. Retail Coffee sales fell 9% to $513.3 million, driven by two 6% list price declines since the beginning of the prior fiscal year. Segment profit was $173.8 million, relatively flat compared with the year-ago quarter, due to lower commodity costs and favorable Folgers volume/mix, which was offset by lower prices and reduced contribution from Dunkin’ Donuts K-Cup pods.
Sales of U.S. Retail Consumer Foods also declined, decreasing 8% to $537 million. Excluding the impact of the U.S. canned milk divestiture, net sales were down 2%, reflecting lower net price realization, which was impacted by the timing of certain trade program expenses compared to the prior year. Sales for Jif and Smucker’s were down generally in line with the overall segment, while both Crisco and Pillsbury brands declined 5%, as lower net pricing was partially offset by volume gains. The Sahale Snacks brand achieved strong double-digit sales growth in the quarter as a result of distribution gains. Segment profit for U.S. Retail Consumer Foods declined 7% to $111.4 million, reflecting the loss of U.S. canned milk profits.
Elsewhere in the portfolio, U.S. Retail Pet Foods sales fell 6% to $519.5 million, while segment profit increased 5% to $122.2 million, due to synergy realization, lower commodity costs and decreased marketing expense. Segment sales for International and Foodservice dropped 3% to $246 million, as segment profit rose 9% to $39.5 million, reflecting favorable volume/mix and lower commodity costs, which more than offset the impact of the divested business and foreign currency exchange.
Looking ahead, the company remains focused on its strengths, Mr. Smucker said, which are “executing, blocking and tackling, making sure that we have the best consumer engagement possible by supporting our products that we have in market. And then of course delivering against or exceeding our synergy and our working capital targets.”
Another priority going forward for J.M. Smucker is to expand its natural and organic offerings, both through acquisition and innovation.“…as we think about other segments or categories, that would be one area that we would look in terms of bolt-ons.” Mr. Smucker said. “But we just also remain focused as well even in our mainstream businesses, in some cases where we have businesses where you have simple ingredients, more natural offerings, cleaner ingredient deck, those businesses are areas that we will continue to focus on. And I think quite frankly you are hearing that pretty broadly from our entire industry.”