ORRVILLE, OHIO — As The J.M. Smucker Company continues to cope with its underperforming premium dog food brands, cat food and dog treats have come to the rescue, driving sustained growth through the second quarter of the company’s fiscal 2021, ended Oct. 31, 2020.
Overall, the company reported a 4% year-over-year increase in net sales from $1.96 billion to $2.03 billion in the second quarter.
"In the second quarter, we focused on meeting the demands created by the current environment, while continuing to execute our long-term strategy to deliver sustainable growth," said Mark Smucker, president and chief executive officer of The J.M. Smucker Company. “…I want to thank our employees for their ongoing hard work and dedication to provide our customers, consumers, and their pets with a steady food supply from trusted and iconic brands."
Sales for Smucker’s US Retail Pet Foods segment declined approximately 1% or $1.2 million in the second quarter, with $708.7 million in net sales and $124.9 million in segment profit, down 9% or $12.1 million compared to year-ago segment profit. Net sales declines were attributed to lower net pricing, offset by a 1% increase in volume/mix, the company reported.
“Sales in the pet food and snacks segment were in line with expectations, as continued growth for cat food and dog snacks were offset by anticipated softness for dog food,” Smucker said.
The company reported its Meow Mix, private label cat food brands, Pup-Peroni and Milk-Bone dog treats all experienced growth over the quarter, which was offset by sales declines for its Natural Balance premium dog food brand.
“Sales for cat food led by the Meow Mix and 9Lives brand grew 9%, representing the 13th consecutive quarter of cat food growth and our market share improved by over 0.5 point in the quarter,” Smucker said.
The company’s cat food and dog treat businesses are propping up the entire pet food category, which remains the most-profitable segment of The J.M. Smucker Company’s business.
“The dog snacks category continues to experience growth related to increased treating occasions with pet parents spending more time at home with their dogs, translating to net sales growth of 3% for our brands led by Pup-Peroni, Rachael Ray Nutrish and Milk-Bone,” Smucker added.
Additionally, low-single-digit gains for Nutrish over the quarter, combined with growth in wet dog food sales, dog snacks, and cat food and snacks, continue to offset sales declines for Smucker’s premium dry dog food brands.
Smucker said the company is “confident that our actions will improve the trajectory” of its premium dog food brands, which has seen several consecutive quarters of sales declines.
“These efforts include increased marketing investments, enhanced packaging, and improved assortment through SKU optimization and unique innovation launching in the fourth quarter,” Smucker said.
On Dec. 3, the company announced plans to divest its Natural Balance brand, selling it to Nexus Capital Management LP for approximately $50 million. The brand generated net sales of approximately $220 million during Smucker's last fiscal year ended April 30, 2020.
During the question-and-answer section of the company’s second quarter earnings call on Nov. 24, Smucker stated the company remains “very committed to [Nutrish] and ensuring that the dog portfolio gets healthy.”
Smucker’s increased its full year guidance, adjusting net sales projections from between 0% and 1% growth to between 1% and 2% growth. Adjusted earnings per share (EPS) was raised from between $8.20 and $8.60 per share to between $8.55 and $8.85 per share. Free cash flow was raised from between $925 million and $975 million to between $975 million and $1.03 billion. Additionally, capital expenditure projections were raised from $300 million to $315 million.
"We are pleased to raise our full-year financial guidance, while making additional investments in our brands to support their momentum,” Smucker said. “I am confident that we are strengthening our foundation to deliver both our short-term and long-term financial objectives and increase shareholder value."
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