J.M. Smucker (SJM 103.03, -6.15, -5.63%) slid 5.4% in pre-market trade after the company reported disappointing results for the quarter and lowered
its guidance for the fiscal year.
The owner of consumer staples brands Smucker's, Jif, Crisco, Folgers, Milk-Bone, and others reported below-consensus second quarter earnings of $2.17 per share on a 5.1% year/year increase in revenue to $2.02 bln, which was also shy of estimates.
In addition to missing estimates, the company reduced its expectations for the fiscal year. Earnings are now expected between $8.00 per share and $8.20 per share, down from the previous forecast for earnings between $8.40 per share and $8.65 per share. Revenue is expected to hit $7.9 bln, down from the previous forecast for sales of $8.0 bln. The new revenue guidance is close to market expectations while the earnings guidance range is below market estimates.
J.M. Smucker's revenue growth rate was fueled by both its May acquisition of Ainsworth Pet Nutrition and strength in the company's growth brands, including Uncrustables, Nature's Recipe, and Café Bustelo. The recently-acquired Rachael Ray Nutrish brand also provided a positive contribution to net sales.
Gross profit grew 2.2% to $771.3 mln, but gross margin weakened to 38.2% from 39.2% one year ago. Lower pricing and higher costs of pet food, pet snacks, and peanut butter were largely offset by lower costs of coffee.
Looking at the segment breakdown, U.S. Retail Coffee net sales declined 1.2% to arrive at $544.9 mln. The decline was driven by lower net price realization and was partially offset by a favorable volume/mix in brands like 1850, Café Bustelo, and Dukin' Donuts. Segment profit grew 14.6% to $174.3 mln due to lower input costs, which outweighed higher marketing expenses.
U.S. Retail Consumer Foods sales fell 12.5% to $461.9 mln. The decline was driven by last year's divestiture of the U.S. baking business. On an adjusted basis, segment sales grew 1%. Volume/mix contributed four percentage points to the growth rate due to strength in Smucker's, Uncrustables, Jif, and Crisco. Segment profit grew 3.2% to $134.3 mln due to gains from the divestiture of the U.S. baking business.
U.S. Retail Pet Foods sales grew 32.1% to $728.1 mln. The jump was owed to the contribution from the recent acquisition of Ainsworth Pet Nutrition. Adjusted net sales decreased 1%. Volume/mix was little changed as gains in Meow Mix and Nature's Recipe outweighed declines in Milk Bone, Natural Balance, and the discontinued Gravy Train brand. Segment profit increased 1.2% to $123.9 mln due to the addition of Ainsworth. Adjusted profit fell 12.8% due to higher costs.
International and Away from Home sales decreased 2.3% to $286.6 mln. Unfavorable exchange rates and impact from divesting the U.S. baking business were responsible for the decline. Segment profit grew 2.4% to $56.7 mln due to lower pricing and costs and reduced marketing expense.
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