ORRVILLE, OHIO — The J.M. Smucker Company closed out fiscal 2023 and is gearing up for the next four quarters with a new pet food segment strategy front and center.
“During the quarter, we made meaningful progress in our effort to reshape our portfolio with the completion of the divestiture of certain pet food brands, while also returning significant cash to our shareholders,” said Mark Smucker, chair of the board, president and chief executive officer.
Net sales for Smucker’s US Retail Pet Foods segment reached $785.3 million in the fourth quarter, up 9% or $67.2 million year-over-year. Segment profit was $145.5 million, up 21% year-over-year. According to Tucker Marshall, chief financial officer, higher net pricing across the company’s pet food portfolio contributed to a 12% net sales increase over the quarter.
“Excluding $12 million of noncomparable net sales in the prior year related to the divestiture of certain pet food brands, net sales increased $79.2 million, or 11%,” the company stated.
For the full fiscal year, pet food segment sales topped $3.04 billion, up nearly 10% from $2.78 billion in 2022. Full-year segment profit was $494.9 million, up 25% from $395.9 million in 2022.
Despite the recent divestiture, US Retail Pet Foods remains Smucker’s largest business in terms of revenue. The segment made up 36% of Smucker’s net sales in fiscal 2023, followed by US Retail Coffee at 32%.
Mark Smucker cited “strong growth across all categories” for its pet food business in the company’s fourth-quarter earnings call on June 6.
“Dog snacks growth was led by the Milk-Bone brand, which grew net sales 20%,” he said. “This growth reflects the benefits of higher net pricing to recover increased costs and volume growth. The Milk-Bone brand continues to drive growth for our market-leading dog snacks business and the category overall through core offerings and premium position innovation.”
The Meow Mix brand saw continued momentum in the fourth quarter, with net sales up 7%. Smucker noted its cat food demand exceeded the company’s available production capacity in the fourth quarter. Consequences of that constraint were partially offset by dog food and dog snacks in the fourth quarter, Marshall said.
“We are investing in infrastructure and labor to improve efficiencies and increase throughput for the long term,” Mark Smucker said. “We expect improvement in supply catching up to demand through the first half of the new fiscal year.”
Comparable net sales for the company’s dog food brands were up 13% in the fourth quarter, reflecting the company’s recent divestiture of several pet food brands to Post Holdings. The J.M. Smucker Company has since shifted its pet segment strategy from two-thirds pet food and one-third pet snacks to 60% pet snacks and 40% cat food.
“This enables us to allocate more resources and increase investments in the fast-growing and high-margin dog snacks category,” Mark Smucker said. “We expect to grow our dog snacks portfolio to $1 billion in annual net sales over the next several years.”
Within the pet food segment’s $3 billion in net sales in fiscal 2023, cat food led the pack at 34% of sales, with snacks accounting for 33%, dog food accounting for 31%, and private label business accounting for 2% of net sales over the year.
“Progress on optimizing our portfolio continued this past year as we completed the divestiture of certain pet food brands and exited the dog food category,” Mark Smucker said. “This divestiture supports our strategy to focus investments and resources in the higher-margin dog snacks and cat food segments, where we hold leading market share positions with our iconic Milk-Bone and Meow Mix brands.”
Overall, the company reported net sales of $2.2 billion in the fourth quarter, up 10% year-over-year. Full-year net sales were $8.5 billion, up 7% year-over-year.
The company’s fiscal 2024 full-year guidance points to comparable net sales growth between 8.5% and 9.5%, with adjusted earnings per share expected between $9.20 and $9.60 and free cash flow of $650 million. Real net sales — reflecting the company’s recent pet food divestiture — are expected to be down 10% to 11% in 2024. The J.M. Smucker Company is planning $550 million for capital expenditures for the full year.
“Looking ahead to fiscal year 2024, we are focusing on sustaining our business momentum by investing in growth platforms, such as Uncrustables® sandwiches and Milk-Bone® dog treats, and supporting our talented employees whose hard work and dedication have been instrumental to our success,” Mark Smucker said. “We are confident in our long-term strategy of leading in the attractive categories of pet, coffee, and snacking and delivering shareholder value.”
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