J.M. Smucker (SJM 129.19, -1.70) is down 1.3% despite beating fourth quarter expectations.
The food company reported above-consensus fourth quarter earnings of $1.80 per share on a 1.3% year-over-year decline in revenue to $1.78 billion, which was just ahead of expectations.
Net sales fell 1.0% due to lower volume/mix. There was no change in net price realization as lower net pricing within the U.S. Retail Pet Foods segment was offset by higher net pricing on coffee and fruit spreads.
Gross margin declined to 36.3% from 38.1% one year ago. Lower volume/mix and an unfavorable change in derivative gains and losses were responsible for the decline.
Looking at the segment breakdown, U.S. Retail Coffee net sales declined 1.0% to $505.90 million. Volume/mix reduced net sales by 5.0%, but the drop was mostly offset by higher net price realization. Segment profit dropped 14.0% to $149.90 million with increased marketing expense and higher commodity costs contributing to the decline. Segment profit margin fell 430 basis points to 29.6%.
U.S. Retail Consumer Foods net sales were little changed, ticking up $100,000 to $473.80 million. Higher net price realization was offset by lower volume/mix in Crisco and truRoots brands. Segment profit grew 19.0% thanks to higher net pricing and lower manufacturing overhead costs. Segment profit margin jumped 350 basis points to 22.9%.
U.S. Retail Pet Foods net sales fell 5.0% to $534.50 million due to lower net price realization. Volume/mix also weighed on sales. Gains in brands like Nature's Recipe and Milk-Bone were offset by losses across the remaining brands. Segment profit fell 15.0% to $118.00 million while segment profit margin contracted 240 basis points to 22.1%.
International and Foodservice net sales grew 4.0% to $269.6 million with volume/mix contributing to the increase. Segment profit grew 26.0% to $48.40 million while segment profit margin improved 310 basis points to 18.0%.
The company issued guidance for fiscal year 2018, expecting earnings between $7.85 per share and $8.05 per share while net sales are expected to grow about 1.0% thanks to higher net price realization. J.M. Smucker expanded its cost management program by $100 million and now expects to reach $450 million in cost reductions by fiscal 2020.