ORERVILLE, Ohio – Throw out comparisons with sales from stripped companies, and J.M. Smucker’s second quarter was better than expected. Quarterly adjusted sales of US retail coffee, US retail consumer food and US retail pet food business units increased 8%, 9%, and 7%, respectively. The positive momentum prompted the company to raise its full-year guidance.
The basis for quarterly sales growth was price increases and increases in volume and mix per business unit.
“In the second quarter, net sales were up 1% over the previous year,” said Mark T. Smoker, president and CEO. “Excluding non-comparable net sales from divestitures and foreign exchange, net sales grew 8%, with each business exceeding our expectations. Organic net sales grew 6% on a two-year compound annual growth rate, demonstrating growth across all sales segments. retail three in the United States”.
Net income for the quarter ended October 31 was $206 million, or $1.90 per share in common stock, down from $231 million, or $2.02 per share, in the prior year.
Quarterly sales were $2.05 billion versus $2.03 billion in fiscal year 2020.
Elements affecting earnings included increased commodity, manufacturing, transportation, and packaging costs, as well as costs associated with Crisco’s liquidation and Natural Balance.
US pet food sales totaled $702 million. Adjusted for stripping, sales were up 7% during the quarter.
“Growth was mostly driven by the market-leading cat food and dog snack companies, with net sales increasing by 9% and 7%, respectively, while dog food grew by 1%,” said Mr. Smoker.
US coffee retail sales were $645 million driven by all brands in the Smucker home coffee portfolio.
“Our portfolio gained more than half a point in dollar share per quarter, more than any other manufacturer, as we outperformed the category across all segments, including regular, premium, one-cup and instant,” said Mr. Smoker.
Sales growth was led by Dunkin’ and Café Bustelo brands, which grew 10% and 15%, respectively, in retail sales. K-Cup’s growth grew at 2.5 times the category rate and gained more than one share point in the quarter, according to the company.
“In our consumer food business, we have delivered strong results across all categories,” said Mr. Smocker. “Comparative net sales grew 9%. The growth was driven by another quarter of net sales growth across all of our major brands, including Smucker’s Uncrustables, Jif’s Peanut Butter and Smucker Spread.”
Total US retail sales of consumer foodstuffs totaled $441 million during the quarter. On November 18, J.M. Smucker announced plans to build a new plant to manufacture unreliable materials in Makala, Ala. During a question-and-answer session with stock analysts, Mr. Smucker expanded the opportunity the company sees in the brand.
“The investment in the Alabama facility, which we’ll start working on in the next couple of months, will certainly support further growth for what we believe could be up to $1 billion (in sales),” he said. “The reason to believe is that there are a lot of offers on this brand. I mean the No. 1 family penetration is still low. It’s only about 11%.
“No. 2, we have not invested significantly in marketing. Thus, we have not operated any significant consumer spending.”
Mr. Smocker added that he sees opportunities in accommodations outside the home and in Canada. Limiting opportunities has been manufacturing constraints that the company hopes to ease through building an Alabama plant and expanding a plant in Longmont, Colo.
“So, if you think about all of those plus the fact that we haven’t really done any meaningful innovation, we just think there’s a lot of growth opportunity and momentum for this brand,” he said.
Strong quarterly results led management to raise Smucker’s guidance for the full year. Adjusted earnings per share are now expected to range from $8.35 to $8.75, compared to previous guidance of $8.25 to $8.65 per share.
Net sales are expected to range from 0.5% to 0.5% compared to the previous year. Previous guidance sent sales down 2.5% to 1.5% for the year. On a comparison basis, the company said net sales are expected to rise by about 4.5%.
Mr. Smoker said he believed the company had a tailwind for the rest of the year, with consumption continuing to rise at home and believing that a hybrid business model being developed would keep more people at home than it did before the pandemic.
“Because we’re clearly focused on breakfast and lunch, that’s definitely going to continue to support our business as well as, you know, focus on pet snacks,” he said. “We’ve just had some great results backed by both implementation and…what we see as a continuous tailwind for home consumption.”