ORRVILLE, OHIO — The J.M. Smucker Co. on Nov. 21 shared its second quarter fiscal 2023 earnings for the three-month period ended Oct. 31, reporting net sales of $2.21 billion, up 8% from second quarter sales in fiscal 2022. The company’s operating income was down 6% from year-ago to $293.4 million.
According to Mark Smucker, chair of the board, president and chief executive officer, all business segments outperformed expectations in the second quarter, with its pet food and coffee businesses leading topline growth.
"Our second quarter results reflect the ongoing strength of our business, continued demand for our leading brands, and the ability of our team to execute with excellence," he said. "We delivered organic topline growth across all of our businesses, driven by the strength of our portfolio, and our ability to recover cost inflation and manage our supply chain environment."
Smucker’s US Retail Pet Foods segment continues to be its most profitable business, with second-quarter sales totaling $765.2 million, up 9% from the year prior. Segment profit for the pet food business was $120.1 million, up 21%.
The company attributed net sales growth to higher product prices across its pet food portfolio, which was partially offset by volume/mix declines in the dog food segment. Segment profit was also impacted by “increased commodity and ingredient, transportation and packaging costs,” the company stated.
“Higher net pricing actions across the portfolio contributed a 16 percentage point increase to net sales, partially offset by a decreased contribution from volume/mix of 3 percentage points, primarily driven by decreases for dog food,” said Tucker Marshall, chief financial officer.
The divestiture of its private label dry pet food business, which was sold to Diamond Pet Foods in December 2021 for roughly $33 million, continues to impact the business. Excluding the divestiture, net sales were up 14% from the year prior.
Net sales across the company’s cat food portfolio were up 19%, supported by 22% sales growth for its Meow Mix brand.
“This reflects another strong quarter for the brand, with year-over-year net sales growth in 19 of the last 20 quarters,” Smucker said. “Meow Mix® is the #1 dry cat food brand, and continues to grow both household penetration and brand loyalty.”
Net sales for dog snacks increased 15%, led by 20% sales growth for its Milk-Bone brand, which gained one point of dollar share over the quarter and great at twice the category rate, according to Smucker.
Net sales for the company’s dog food portfolio increased 10%, supported by its Kibbles ‘N Bits and Nutrish brands.
“Consumer take away was even stronger, up 18%, demonstrating progress on our efforts to stabilize our dog food portfolio,” Smucker said. “We are well positioned to continue benefiting from some shifts within the category, as our portfolio provides offerings across the price spectrum including premium, mainstream, and value products.”
Growth for The J.M. Smucker Co. will continue to be impacted by supply chain difficulties and economic factors, Marshall noted.
“Ongoing cost inflation, volatility in supply chains and the overall macroeconomic environment continue to impact financial results and cause uncertainty and risk for the fiscal year 2023 outlook,” Marshall said. “Any manufacturing or supply chain disruption, as well as changes in consumer purchasing behavior, including the potential impact to volume due to recent price increases, retailer inventory levels, and broader macroeconomic conditions, could materially impact actual results. In particular, the Jif® peanut butter recall will impact our financial results for the full fiscal year.”
Smucker added, its key growth categories — pet, coffee and frozen handheld snacks — continue to see strong at-home demand.
"Given our strong performance and sustained business momentum, we are raising our net sales and adjusted earnings per share expectations for this fiscal year,” Smucker said. “Looking ahead, we will continue to execute on our strategy and make investments in our key growth platforms to ensure consistent top- and bottom-line growth, continuing to position us well to deliver long-term shareholder value."
The J.M. Smucker Co. expects net sales growth between 5.5% and 6.5%, up from its previous projection of 4% to 5% net sales growth. Adjusted earnings per share has also been adjusted up, now projected between $8.35 and $8.75 per share. Free cash flow and capital expenditure estimates remain at $550 million each for the full fiscal year.
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