Dive Brief:
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The J.M. Smucker Company reported a second-quarter net sales hike of 1%, to $1.92 billion. The company said the $9.7 million increase from the same period last year was due to higher pricing for its Jif peanut butter and Smucker's brand jams and jellies, although the pet food and international sales sectors showed positive growth. Folgers coffee sales continued to be down, but were offset by gains in its Dunkin' Donuts and Café Bustelo brands, the company said.
- Net adjusted income dropped 4.1% to $229.5 million, compared to $239.2 million for the year-ago period. Adjusted earnings per share were $2.02, a drop of 1% from the same period last year, the company reported. Smucker also updated its full-year 2018 net sales outlook to be down slightly, and dropped its adjusted earnings per share range 5 cents to $7.75 to $7.90 because of higher anticipated freight costs.
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"We are pleased with our second quarter results, primarily driven by our pet food business and the strong performance of a number of key brands across all our businesses," CEO Mark Smucker said in the report. "This included double-digit sales increases for Nature's Recipe dog food, Dunkin' Donuts coffee, and Jif peanut butter. We also experienced continued strong growth of our brands in e-commerce, as sales in this channel doubled in the quarter for our U.S. retail segments."
Dive Insight:
While Smucker is finally showing an overall net sales increase, its Folgers brand continues to slide. The legacy coffee brand could perk up some with the company's recent debut of a new line of naturally flavored 100% Arabica coffee called Simply Gourmet, but that remains to be seen — especially with the stiff coffee competition in today's marketplace.
Sales in the company's retail consumer foods segment dropped 5%, or $25.8 million. The drop primarily came from lower-than-anticipated sales for Crisco and Pillsbury brands, the earnings report said. But that was offset somewhat by improved net pricing and reduced marketing costs.
The increase in the company's e-commerce sales — which doubled for retailers in this quarter — fulfills a goal that Smucker mentioned in August's earnings call with investors. While there is much room for expansion here — according to a Food Navigator report, e-commerce represented just 2% of company sales in the previous quarter — any growth is welcome. Earlier this year, the company reorganized to focus more on marketing, innovation and supply chain initiatives, the company CEO said. Smucker's website now focuses on the fruit that goes into its products, as well as recipes and less conventional ways to use jams and jellies.
A pending acquisition may also help bolster future earnings. Earlier this year, Smucker announced a deal to acquire the Wesson oil brand from Conagra in a $285 million all-cash transaction, according to a company statement. The company has said it expects the acquisition to add annual net sales of approximately $230 million. The transaction is currently pending regulatory approval.
Smucker's earnings were also helped out by the pet food segment. Net sales in the most recent period jumped $21.1 million, or 4%, to $552.1 million following higher sales of the Nature's Recipe and Meow Mix brands.
Company results could improve once the Wesson purchase is fully integrated, although it's hard to tell how much the acquisition will help, considering the company's current oils and baking categories are in a slump. What is apparent is that Smucker can't continue to rely on long time, trusted consumer brands to bolster its bottom line — as it is seeing with Folgers, Crisco and Pillsbury. It will need to innovate, trim overhead and appeal to shifting consumer tastes to keep its performance on a positive track.