ORRVILLE, OHIO — The J.M. Smucker Company shared its first quarter fiscal year 2022 earnings on Aug. 26 for the three-month period ended July 31. Supply chain challenges, foreign exchange rates and divestitures negatively impacted net sales over the quarter, including for its US Retail Pet Foods segment.
The company’s pet food segment remains its most profitable business. First-quarter net sales for the segment totaled $648 million, down $44.6 million or 6% from year-ago. Segment profit totaled $79.9 million, down $45.4 million or 36% from year-ago. The company cited “higher commodity and transportation costs” as the underlying factors in segment profit decline.
The company stated its pet segment sales grew by $11.4 million or 2% when excluding its divestiture of Natural Balance, which would have contributed an estimated $56 million in sales.
Sales declines for the Rachael Ray Nutrish and Kibbles ‘n Bits brands offset a 2% increase in sales driven by positive volume/mix among Meow Mix, Milk-Bone and Pup-Peroni brands.
“We do remain committed to the brand [Rachael Ray Nutrish],” said Mark Smucker, president and chief executive officer, during a Q&A session on Aug. 26. “We have continued our portfolio and packaging optimizations. We are still at the early stages of the Big Life launch. We believe that there is still potential for the brand.
“Specifically, though, we have not been satisfied with some of our marketing investments, and feel that they have not delivered the requisite return. So, we are pulling back on some of those marketing investments still supporting the master brand and Big Life but making sure that the dollars we're spending there are truly going to make a difference, and we're going to pull back temporarily and reevaluate some of those investments.”
Smucker added the “full recovery of the Nutrish brand will be delayed throughout the remainder of this fiscal year.” Overall, the company expects the pet food business to make a comeback in terms of its profitability in the last half of the year, Smucker said.
As the company reevaluates its premium natural portfolio, it will continue to look to its value brands and pet treat offerings to support the segment.
“There are more pets out there, and so pet snacks will continue to meet our expectations because consumers will continue to treat their pets,” he said.
Overall, The J.M. Smucker Company reported $1.86 billion in sales, down 6% from its first quarter of fiscal 2021. Excluding impacts from the company’s divestitures of Crisco and Natural Balance brands, net sales were up 1%.
"Our first quarter results reflected organic net sales growth, while lapping double-digit growth in the prior year, and continued to demonstrate consumers' desire for our brands, while earnings were in line with our expectations," Smucker said. "The progress we have made against our strategy and executional priorities has made us a stronger company, positioning our iconic brands for continued growth in market share.”
The company updated its full-year guidance for fiscal 2022. Its new net sales projections reflect a decrease of 2.5% to 1.5% (previously a decrease of 3% to 2%), free cash flow has been downgraded from $900 million to $800 million, and adjusted earnings per share are now projected between $8.25 and $8.65 (previously between $8.70 and $9.10). Capital expenditure projections for the company remained at $380 million for the year.
"Our industry continues to navigate a period of significant supply chain volatility, disruption, and cost inflation. In the near term, we expect to experience higher raw material and logistics cost increases. However, we are optimistic in managing these challenges and remain confident in the momentum of our business, the talent and commitment of our people, and our strengthened financial position to deliver balanced top- and bottom-line growth and long-term shareholder value."
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