Categories Analysis, Consumer

Key takeaways from J.M. Smucker’s (SJM) Q4 2023 earnings report

Adjusted EPS is expected to be $9.20-9.60 in FY2024

Shares of the J.M. Smucker Co. (NYSE: SJM) were down over 2% on Tuesday despite the company beating expectations on its earnings results for the fourth quarter of 2023. The stock has gained 11% over the past 12 months. Here’s a look at the key takeaways from the earnings report:

Better-than-expected results

J.M. Smucker’s net sales in Q4 2023 increased 10% year-over-year to $2.23 billion, surpassing projections of $2.17 billion. On a GAAP basis, the company reported a net loss of $5.69 per share, reflecting an impact from the divestiture of certain pet food brands. Adjusted EPS rose 18% to $2.64, beating the consensus target of $2.37.

Category performance

During the fourth quarter, SJM grew comparable sales by 11%, helped by growth across all its segments. The Pet Foods segment recorded double-digit comparable sales growth, driven by momentum in all categories. Growth in dog snacks was driven by the Milk-Bone brand, which grew sales by 20%, benefiting from higher pricing and volume growth.

The company saw momentum in dog food and cat food as well, with the latter benefiting from gains in the Meow Mix brand. The divestiture of certain pet food brands has brought the pet business to approx. 60% pet snacks and 40% cat food.

This shift is expected to help improve profit margin and product mix over time. It will also allow SJM to focus and invest more in its fast-growing and high-margin dog snacks category. On its conference call, the company said it aims to grow its dog snacks portfolio to $1 billion in annual net sales over the next several years.

The Coffee segment saw net sales growth of 7%, driven by gains in the Café Bustelo, Folgers, and Dunkin brands. The at-home coffee category remains strong and is expected to see continued growth. The company’s expansion into cold coffee, multi-serve offerings, and ready-to-drink offerings are expected to boost this growth.

The Consumer Foods segment witnessed double-digit growth in net sales, helped by gains in Uncrustables, Smucker’s fruit spreads, and Jif peanut butter. Jif returned to net sales growth during the quarter and SJM expects to drive double-digit sales growth for the brand in FY2024 through increased marketing and other activities.

Outlook

SJM continues to anticipate risks from inflation, supply chain challenges, and macroeconomic headwinds in fiscal year 2024. The company expects comparable net sales to increase 8.5-9.5% in FY2024 compared to last year. This reflects higher volume/mix benefits across all its segments as well as higher pricing.

Net sales are expected to decrease 10-11% versus last year, reflecting $1.5 billion of net sales related to the divested pet food brands in the prior year. Adjusted EPS for the year is expected to range between $9.20-9.60.

In the first quarter of 2024, comparable net sales and adjusted EPS are expected to increase approx. 20%, helped by business momentum and the lapping of the Jif peanut butter recall impact.

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