The J. M. Smucker Company (NYSE:SJM) Q1 2024 Earnings Call Transcript

The J. M. Smucker Company (NYSE:SJM) Q1 2024 Earnings Call Transcript August 29, 2023

The J. M. Smucker Company beats earnings expectations. Reported EPS is $2.21, expectations were $2.07.

Operator: Good morning. And welcome to The J.M. Smucker Company’s Fiscal 2024 First Quarter Earnings Conference Question-and-Answer Session. This conference call is being recorded and all participants are in listen-only mode. Please limit yourselves to two questions and require if you have additional questions. I’ll now turn the conference over to Aaron Broholm, Vice President of Investor Relations. Please go ahead, sir.

Aaron Broholm: Good morning. And thank you for joining our fiscal 2024 first quarter earnings question-and-answer session. I hope everyone had a chance to review our results as detailed in this morning’s press release and management’s prepared remarks, which are available on our corporate website at jmsmucker.com. We will also post an audio replay of this call at the conclusion of this morning’s Q&A session. During today’s call, we may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, we use non-GAAP results to evaluate performance internally.

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I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning’s press release. Participating on this call are Mark Smucker, Chair of the Board, President and Chief Executive Officer; and Tucker Marshall, Chief Financial Officer. We will now open up the call for questions. Operator, please queue up the first question.

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Q&A Session

Operator: Thank you. [Operator Instructions] Our first question is coming from Andrew Lazar from Barclays.

Andrew Lazar: I guess to start off, Mark, on the last earnings call, I think you mentioned that if we strip out Jif contract manufacturing and divestiture impacts, Company expected about 4% organic sales growth, 3 points of which were expected to be volume on sort of a truly underlying basis for the full year. And I’m curious if this is broadly where you still see it today. And if so, maybe why the Company is not necessarily seeing the same sort of volume weakness the industry seems to be dealing with currently and as other sort of peer companies have discussed?

Tucker Marshall: Andrew, good morning, this is Tucker. You are correct. As you began to break down our 9% comparable growth guidance, that 4% does have 3 points of volume/mix growth, largely driven by Uncrustables coffee, Milk-Bone and Meow Mix and then the 1 point of pricing, as you have noted.

Mark Smucker: Yes. Andrew, it’s Mark. Thanks for the question. I think as you look at our categories, we are in the right categories, which are resilient ones. And as we continue to share our story, we’ve gotten way more focused. We participate in categories that are growing, and we participate across the breadth of those categories, all the while still investing in our brands. So, we actually had, as you saw, a very good quarter of both sales and volume growth, and we expect the momentum to continue as we continue to invest, as we continue to execute with excellence, and I could cite multiple areas. I mean just peanut butter as an example of an affordable protein, continuing to grow, getting Jif back into its number one share position.

Milk-Bone as an example, where you’ve got products that span value to premium, really meeting the consumer where they need. And then last bit, of course, not least, Uncrustables continues to be a strong growth engine for the Company. So just very pleased with the results this quarter and our outlook for the future.

Andrew Lazar: Got it. Thank you for that. And then just lastly, pet sales growth was a bit below what we’d modeled. I guess I’m curious, how did it compare to your expectations? And if sales were a bit slower, I guess, what’s driving the weakness? And was it contract manufacturing-related or something else? Thank you.

Tucker Marshall: Andrew, we continue to see positive momentum in our pet portfolio. And any shortfall to expectations for the quarter would be attributable to the co-manufacturing agreement. And as we noted on our prepared remarks, we have revised our outlook for co-manufacturing for the full year to be $160 million, which is a $25 million decline than what we expected coming into the year. And that would have been the driver for the quarter.

Andrew Lazar: Got it. And just the decline is — what would drive the decline in the co-man sales?

Tucker Marshall: Yes. It would be what Post Holdings would need from their production standpoint as we support relocating products between manufacturing facility and supporting volumes. So, it would just be what their expectation is in their network.

Operator: Thank you. Next question is coming from Peter Galbo from Bank of America.

Peter Galbo: Maybe we could just start, I think there’s a bit of confusion this morning just around your reported comparable sales growth number, Tucker or Mark, of the 21%. And then, I believe on slide 4 of the supplement, it shows closer to 16%. So, I just wanted to be able to bridge that for folks. And maybe, Tucker, if you could just help, I think in the press release, you actually have the GAAP to non-GAAP reconciliation at the 21%. So, if we can talk through those as well as just where that comes in relative to what your expectations were, I think, for the quarter of the plus 20% that you would put out last quarter. Thanks.