The J.M. Smucker Co. Announces Fiscal 2025 Third Quarter Results

ORRVILLE, Ohio, Feb. 27, 2025 /PRNewswire/ -- The J.M. Smucker Co. (NYSE:SJM) today announced results for the third quarter ended January 31, 2025, of its 2025 fiscal year. Financial results for the third quarter of fiscal year 2025 reflect the divestiture of the Voortman^® business on December 2, 2024, divestiture of the Canada condiment business on January 2, 2024, and acquisition of Hostess Brands, Inc. ("Hostess Brands") on November 7, 2023. All comparisons are to the third quarter of the prior fiscal year, unless otherwise noted.

EXECUTIVE SUMMARY

• Net sales was $2.2 billion, a decrease of $43.2 million, or 2 percent. Net sales excluding the divestitures, acquisition, and foreign currency exchange decreased 1 percent.
• Net loss per diluted share was $6.22, reflecting noncash impairment charges attributable to the Sweet Baked Snacks reporting unit. Adjusted earnings per share was $2.61, an increase of 5 percent.
• Cash provided by operations was $239.4 million compared to $406.5 million in the prior year. Free cash flow was $151.3 million, compared to $249.6 million in the prior year.
• The Company updated its full-year fiscal 2025 financial outlook.

CHIEF EXECUTIVE OFFICER REMARKS

"Our third quarter performance reflects the continued execution of our strategy and ability to deliver positive results in a dynamic operating and consumer environment," said Mark Smucker, Chair of the Board, President and Chief Executive Officer. "Net sales for the quarter would have been above our expectations, however, we experienced certain supply chain disruptions that negatively impacted results. Disciplined cost management and execution enabled us to deliver adjusted earnings per share that exceeded our expectations."

"Our strategy and the prioritization of our key growth platforms has enabled us to deliver a strong fiscal year to date, and we are well-positioned to deliver both top- and bottom-line growth, while increasing shareholder value over time."

THIRD QUARTER CONSOLIDATED RESULTS

Net Sales

Net sales decreased $43.2 million, or 2 percent. Excluding $30.6 million of noncomparable net sales in the prior year related to divestitures, $20.1 million of incremental net sales in the current year related to the Hostess Brands acquisition, and $4.2 million of unfavorable foreign currency exchange, net sales decreased $28.5 million, or 1 percent.

The decrease in comparable net sales reflects a 5 percentage point decrease from volume/mix, primarily driven by decreases for coffee, dog snacks, and lower contract manufacturing sales related to the divested pet food brands, partially offset by an increase for Uncrustables^® sandwiches. Comparable net sales also reflects a 3 percentage point increase from net price realization, primarily driven by higher net pricing for coffee.

Operating Income

Gross profit increased $55.0 million, or 7 percent. The increase primarily reflects higher net price realization, lower costs, and the noncomparable benefit of Hostess Brands, partially offset by unfavorable volume/mix and the noncomparable impact of divestitures. Operating income (loss) decreased $891.4 million, primarily reflecting noncash impairment charges of $794.3 million and $208.2 million related to the goodwill of the Sweet Baked Snacks reporting unit and Hostess^® brand indefinite-lived trademark, respectively, and the $50.2 million net pre-tax loss on divestitures, reflecting the $42.6 million pre-tax loss on the disposal group of certain Sweet Baked Snacks value brands classified as held for sale and a $7.6 million adjustment to the Voortman^® brand disposal group. These impacts were partially offset by an $88.8 million decrease in other special project costs, primarily related to integration costs associated with the acquisition of Hostess Brands, and the increase in gross profit. 

Adjusted gross profit decreased $9.1 million, or 1 percent. The difference between adjusted gross profit and generally accepted accounting principles ("GAAP") results primarily reflects the exclusion of the $60.0 million change in net cumulative unallocated derivative gains and losses. Adjusted operating income increased $6.3 million, or 1 percent, which further reflects the exclusion of the noncash impairment charges of $1,002.5 million associated with the goodwill of the Sweet Baked Snacks reporting unit and Hostess^® brand indefinite-lived trademark, the $50.2 million net pre-tax loss on divestitures, amortization expense, and other special project costs as compared to GAAP operating income.

Interest Expense and Income Taxes

Net interest expense decreased $4.4 million, primarily due to a decrease in interest expense related to the Term Loan that was prepaid in full during the fourth quarter of fiscal 2024.

The effective income tax rate was 0.0 percent in the quarter, as compared to 38.4 percent in the prior year. The decrease in effective income tax rate is attributable to the impact of the goodwill impairment charge for the Sweet Baked Snacks reporting unit, partially offset by the impacts of the integration of Hostess Brands and the completion of the Voortman^® divestiture. Additionally, the prior year effective income tax rate included unfavorable adjustments associated with the acquisition of Hostess Brands as well as higher state income taxes related to the acquisition. The adjusted effective income tax rate was 23.7 percent, compared to 26.1 percent in the prior year. The prior year adjusted effective income tax rate included an unfavorable impact of higher state income taxes related to the acquisition of Hostess Brands.

Cash Flow and Debt

Cash provided by operating activities was $239.4 million, compared to $406.5 million in the prior year, primarily reflecting higher working capital requirements in fiscal 2025, timing of income tax payments, and lapping the $42.5 million proceeds received from settlement of the interest rate contracts assumed as part of the Hostess Brands acquisition in the prior year, partially offset by higher net income (loss) adjusted for noncash items in the current year. Free cash flow was $151.3 million, compared to $249.6 million in the prior year, driven by the decrease in cash provided by operating activities, partially offset by a decrease in capital expenditures as compared to the prior year.

FULL-YEAR OUTLOOK

The Company updated its full-year fiscal 2025 guidance, as summarized below.

Net sales is expected to increase 7.25 percent compared to the prior year. Comparable net sales is expected to increase approximately 0.75 percent, which excludes noncomparable sales in the current year from the acquisition of Hostess Brands and noncomparable sales in the prior year related to the divested Voortman^®, Canada condiment, and Sahale Snacks^® businesses. This guidance also reflects a decline of approximately $100.0 million of contract manufacturing sales related to the divested pet food brands as compared to the prior year.

Adjusted earnings per share is expected to range from $9.85 to $10.15, based on 106.7 million weighted-average common shares outstanding. This guidance assumes an adjusted gross profit margin of approximately 38.0 percent and an increase of SD&A expenses of approximately 8.0 percent as compared to the prior year. Interest expense is expected to be $390.0 million, and the adjusted effective income tax rate is anticipated to be 24.1 percent. Free cash flow is expected to be approximately $925.0 million with capital expenditures of $400.0 million.

The full-year fiscal 2025 guidance does not reflect any impact related to the Company's previously announced agreement to divest certain Sweet Baked Snacks value brands. The transaction is expected to close during the fourth quarter of the current fiscal year and the fiscal 2025 net sales impact is expected to be approximately $10 million and immaterial to adjusted earnings per share. The Company anticipates using the proceeds from the transaction to pay down debt.

THIRD QUARTER SEGMENT RESULTS

(Dollar amounts in the segment tables below are reported in millions.)

U.S. Retail Coffee

Net sales increased $13.1 million, or 2 percent. Net price realization increased net sales by 9 percentage points, primarily driven by higher net pricing for the Folgers^® and Café Bustelo^® brands. Volume/mix decreased net sales by 7 percentage points, reflecting a decline for the Folgers^® and Dunkin'^® brands, partially offset by an increase for the Café Bustelo^® brand.

Segment profit increased $0.8 million, primarily reflecting higher net price realization and favorable property taxes, mostly offset by higher commodity costs and unfavorable volume/mix.

U.S. Retail Frozen Handheld and Spreads

Net sales increased $8.4 million, or 2 percent. Volume/mix increased net sales by 2 percentage points, primarily driven by an increase for Uncrustables^® sandwiches, partially offset by decreases for fruit spreads and peanut butter. Net price realization was neutral to net sales, reflecting higher trade spend for peanut butter, mostly offset by higher net pricing for toppings and syrups.

Segment profit decreased $4.9 million, primarily driven by higher costs, partially offset by lower pre-production expenses primarily related to the new Uncrustables^® sandwiches manufacturing facility.

U.S. Retail Pet Foods

Net sales decreased $42.2 million, or 9 percent. Volume/mix decreased net sales by 9 percentage points, primarily driven by a decrease for dog snacks and lower contract manufacturing sales related to the divested pet food brands, partially offset by an increase for cat food. Net price realization was neutral to net sales, as higher trade spend for cat food was mostly offset by lower trade spend for dog snacks.

Segment profit increased $7.3 million, primarily driven by lower costs, partially offset by unfavorable volume/mix.

Sweet Baked Snacks

Net sales decreased $21.7 million, or 7 percent. Excluding noncomparable net sales in the current year related to the Hostess Brands acquisition and in the prior year related to the divested Voortman^® business, net sales decreased $21.6 million, or 8 percent. Volume/mix decreased net sales by 5 percentage points, primarily reflecting decreases for snack cakes and private label products, partially offset by an increase for donuts. Net price realization decreased net sales by 2 percentage points, primarily reflecting lower net pricing across the portfolio.

Segment profit decreased $13.2 million, primarily reflecting lower net price realization, the impact of the noncomparable segment profit in the prior year related to the divested Voortman^® business, higher marketing spend, and unfavorable volume/mix, partially offset by the impact of the noncomparable segment profit in the current year related to the Hostess Brands acquisition and lower costs.

International and Away From Home

Net sales decreased $0.8 million. Excluding $10.4 million of noncomparable net sales in the prior year related to the divested Canada condiment business and $4.2 million of unfavorable foreign currency exchange, net sales increased $13.8 million, or 5 percent. Net price realization contributed 6 percentage points to net sales, primarily driven by higher net price pricing for coffee and Uncrustables^® sandwiches. Volume/mix decreased net sales by 1 percentage point, primarily driven by a decrease for coffee, partially offset by increases for peanut butter, cat food, and flour and baking.

Segment profit increased $11.2 million, primarily reflecting higher net price realization, partially offset by higher costs and unfavorable foreign currency exchange.

Financial Results Discussion and Webcast

At approximately 7:00 a.m. Eastern Standard Time today, the Company will post to its website at investors.jmsmucker.com a pre-recorded management discussion of its fiscal 2025 third quarter financial results, a transcript of the discussion, and supplemental materials. At 8:30 a.m. Eastern Standard Time today, the Company will webcast a live question-and-answer session with Mark Smucker, Chair of the Board, President and Chief Executive Officer, and Tucker Marshall, Chief Financial Officer. The live webcast and replay can be accessed at investors.jmsmucker.com.

The J.M. Smucker Co. Forward-Looking Statements

This press release contains forward-looking statements, such as projected net sales, operating results, earnings, and cash flows that are subject to risks and uncertainties that could cause actual results to differ materially from future results expressed or implied by those forward-looking statements. The risks, uncertainties, important factors, and assumptions listed and discussed in this press release, which could cause actual results to differ materially from those expressed, include: uncertainties related to the timing of the consummation of the sale of certain Sweet Baked Snacks value brands to JTM Foods, LLC, including the possibility that any or all of the conditions to the sale may not be satisfied or waived; the Company's ability to successfully integrate Hostess Brands' operations and employees and to implement plans and achieve financial forecasts with respect to the Hostess Brands' business; the Company's ability to realize the anticipated benefits, including synergies and cost savings, related to the Hostess Brands acquisition, including the possibility that the expected benefits will not be realized or will not be realized within the expected time period; disruption from the acquisition of Hostess Brands by diverting the attention of the Company's management and making it more difficult to maintain business and operational relationships; the negative effects of the acquisition of Hostess Brands on the market price of the Company's common shares; the amount of the costs, fees, expenses, and charges and the risk of litigation related to the acquisition of Hostess Brands; the effect of the acquisition of Hostess Brands on the Company's business relationships, operating results, ability to hire and retain key talent, and business generally; disruptions or inefficiencies in the Company's operations or supply chain, including any impact caused by product recalls, political instability, terrorism, geopolitical conflicts (including the ongoing conflicts between Russia and Ukraine and Israel and Hamas), extreme weather conditions, natural disasters, pandemics, work stoppages or labor shortages, or other calamities; risks related to the availability of, and cost inflation in, supply chain inputs, including labor, raw materials, commodities, packaging, and transportation; the impact of food security concerns involving either the Company's products or its competitors' products, including changes in consumer preference, consumer litigation, actions by the U.S. Food and Drug Administration or other agencies, and product recalls; risks associated with derivative and purchasing strategies the Company employs to manage commodity pricing and interest rate risks; the availability of reliable transportation on acceptable terms; the ability to achieve cost savings related to restructuring and cost management programs in the amounts and within the time frames currently anticipated; the ability to generate sufficient cash flow to continue operating under the Company's capital deployment model, including capital expenditures, debt repayment to meet the Company's deleveraging objectives, dividend payments, and share repurchases; a change in outlook or downgrade in the Company's public credit ratings by a rating agency below investment grade; the ability to implement and realize the full benefit of price changes, and the impact of the timing of the price changes to profits and cash flow in a particular period; the success and cost of marketing and sales programs and strategies intended to promote growth in the Company's businesses, including product innovation; general competitive activity in the market, including competitors' pricing practices and promotional spending levels; the Company's ability to attract and retain key talent; the concentration of certain of the Company's businesses with key customers and suppliers, including primary or single-source suppliers of certain key raw materials and finished goods, and the Company's ability to manage and maintain key relationships; impairments in the carrying value of goodwill, other intangible assets, or other long-lived assets or changes in the useful lives of other intangible assets or other long-lived assets; the impact of new or changes to existing governmental laws and regulations and their application, including tariffs; the outcome of tax examinations, changes in tax laws, and other tax matters; a disruption, failure, or security breach of the Company or its suppliers' information technology systems, including, but not limited to, ransomware attacks; foreign currency exchange rate and interest rate fluctuations; and risks related to other factors described under "Risk Factors" in other reports and statements filed with the Securities and Exchange Commission, including the Company's most recent Annual Report on Form 10-K. The Company undertakes no obligation to update or revise these forward-looking statements, which speak only as of the date made, to reflect new events or circumstances.

About The J.M. Smucker Co.

At The J.M. Smucker Co., it is our privilege to make food people and pets love by offering a diverse family of brands available across North America. We are proud to lead in the coffee, peanut butter, fruit spreads, frozen handheld, sweet baked goods, dog snacks, and cat food categories by offering brands consumers trust for themselves and their families each day, including Folgers^®, Dunkin'^®, Café Bustelo^®, Jif^®, Uncrustables^®, Smucker's^®, Hostess^®, Milk-Bone^®, and Meow Mix^®. Through our unwavering commitment to producing quality products, operating responsibly and ethically and delivering on our Purpose, we will continue to grow our business while making a positive impact on society. For more information, please visit jmsmucker.com.

The J.M. Smucker Co. is the owner of all trademarks referenced herein, except for Dunkin'^®, which is a trademark of DD IP Holder LLC. The Dunkin'^® brand is licensed to The J.M. Smucker Co. for packaged coffee products sold in retail channels such as grocery stores, mass merchandisers, club stores, e-commerce and drug stores, and in certain away from home channels. This information does not pertain to products for sale in Dunkin'^® restaurants.

 

 

 

 

Non-GAAP Financial Measures

The Company uses non-GAAP financial measures, including: net sales excluding acquisition, divestitures, and foreign currency exchange; adjusted gross profit; adjusted operating income; adjusted income; adjusted earnings per share; earnings before interest, taxes, depreciation, amortization expense, impairment charges related to intangible assets, and gains and losses on divestitures ("EBITDA (as adjusted)"); and free cash flow, as key measures for purposes of evaluating performance internally. The Company believes that investors' understanding of its performance is enhanced by disclosing these performance measures. Furthermore, these non-GAAP financial measures are used by management in preparation of the annual budget and for the monthly analyses of its operating results. The Board of Directors also utilizes certain non-GAAP financial measures as components for measuring performance for incentive compensation purposes.

Non-GAAP financial measures exclude certain items affecting comparability that can significantly affect the year-over-year assessment of operating results, which include amortization expense and impairment charges related to intangible assets; certain divestiture, acquisition, integration, and restructuring costs ("special project costs"); gains and losses on divestitures; the net change in cumulative unallocated gains and losses on commodity and foreign currency exchange derivative activities ("change in net cumulative unallocated derivative gains and losses"); and other infrequently occurring items that do not directly reflect ongoing operating results. Income taxes, as adjusted is calculated using an adjusted effective income tax rate that is applied to adjusted income before income taxes and reflects the exclusion of the previously discussed items, as well as any adjustments for one-time tax-related activities, when they occur. While this adjusted effective income tax rate does not generally differ materially from the GAAP effective income tax rate, certain exclusions from non-GAAP results, such as the unfavorable permanent tax impacts associated with the goodwill impairment charge for the Sweet Baked Snacks reporting unit and the sale of the Voortman Cookies Limited entity and the favorable noncash deferred tax benefit associated with the integration of Hostess Brands into the Company, can significantly impact the adjusted effective income tax rate.

These non-GAAP financial measures are not intended to replace the presentation of financial results in accordance with U.S. GAAP. Rather, the presentation of these non-GAAP financial measures supplements other metrics used by management to internally evaluate its businesses and facilitate the comparison of past and present operations and liquidity. These non-GAAP financial measures may not be comparable to similar measures used by other companies and may exclude certain nondiscretionary expenses and cash payments. A reconciliation of certain non-GAAP financial measures to the comparable GAAP financial measure for the current and prior year periods is included in the "Unaudited Non-GAAP Financial Measures" tables. The Company has also provided a reconciliation of non-GAAP financial measures for its fiscal year 2025 outlook.

 

 

The following tables provide a reconciliation of the Company's fiscal 2025 guidance for estimated adjusted earnings per share and free cash flow.

 

 

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SOURCE The J.M. Smucker Co.