The J.M. Smucker Company 2027 Q1 Earnings Call
Review the key takeaways and the transcript of this earnings call.
- J.M. Smucker Company reported an $0.84 tariff refund benefit in fiscal Q1 and anticipates about a $0.60 benefit for the full year, net of incremental costs and spend back.
- Coffee volume is expected to decrease by low single digits for the full year despite recent volume increases and moderated shelf prices.
- The company experienced mid-single digit cost of goods sold inflation, about 100 basis points higher than previously expected, driven largely by freight and some commodity and ingredient costs.
- Frozen handheld and spreads segment delivered strong top line momentum and profitability in Q1, with Uncrustables brand expected to grow high single digits.
- Retail dog snacks showed solid performance, with Pepperoni up 5% in net sales and 7% in volume, Milk-Bone returned to volume growth, while jerky treats declined.
- Sweet baked snacks, including Hostess, performed in line with expectations; donuts and mini churro donuts were bright spots, while convenience channel traffic remains challenged.
- Folgers coffee brand grew in Q1 with flat volume mix, supported by targeted SKUs during the July America 250 holiday period.
- Uncrustables brand achieved a billion-dollar milestone last fiscal year and is expected to grow high single digits this year, supported by new marketing, fridge-friendly product launch, and expanded distribution.
- Bustelo coffee grew 23% in Q1 and continues to expand distribution and product offerings, targeting top four category brand status.
- The company achieved a three times leverage ratio ahead of expectations and plans to pay down about $500 million of debt this year, maintain quarterly dividends, and consider share repurchases.
- Transformation office continues to deliver cost and productivity benefits, offsetting inflation and supporting reinvestment.
- Management remains committed to disciplined marketing spend focused on brands with expected meaningful return on investment.
- The company is advancing pre-production expenses to start up capacity earlier at the McCalla, Alabama facility to support Uncrustables growth.
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Transcript
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Good morning, and welcome to The J. M. Smucker Company's fiscal 2027 first quarter earnings question and answer session. This conference call is being recorded, and all participants will be in a listen-only mode. Please limit yourselves to two questions and re-queue if you have additional questions. I will now turn the conference call over to Crystal Beiting, Vice President, Investor Relations, Financial Planning and Analysis. Thank you. You may begin.
Good morning, and thank you for joining our fiscal 2027 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 could differ materially due to risks and uncertainties. Additionally, we use non-GAAP results to evaluate performance internally. 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, Chief Executive Officer, President, and Chair of the Board, and Tucker Marshall, Chief Financial Officer, Executive Vice President, Frozen, Handheld and Spreads, and Sweet Baked Snacks. We will now open the call for questions. Operator, please queue up the first question.
Thank you. The question and answer session will begin at this time. If you are using a speakerphone, please pick up the handset before pressing any numbers. Should you have a question, please press star one on your telephone. If you wish to withdraw your question, please press star two. For operator assistance, please press star zero. As a reminder, please limit yourselves to two questions during the question and answer session. Should you have additional questions, you may re-queue, and the company will take questions as time allows. Please stand by for the first question. Our first question is coming from Andrew Lazar from Barclays. Your line is now live.
Great. Thanks so much. Good morning, everybody.
Morning. Morning. I guess, as I understand it looks like you received an $0.84 tariff refund benefit in fiscal 1Q and anticipate about a $0.60 benefit for the full year net of some incremental costs and spend back.
I was wondering if you are able to give us a better sense of what is incorporated in that sort of $0.24 differential in SD&A. I guess, how much is higher admin expenses for the build-out of McCalla versus higher brand spend or something else?
Andrew, good morning. Morning. Yes, we did receive an $0.84 benefit from tariff refunds in our first quarter, and we are choosing to reinvest a portion of that in SD&A expenses, largely coming through administrative expense, along with some incremental marketing spend and advancing pre-production expenses associated with our McCalla, Alabama facility, all in support of the Uncrustables brand.
Then acknowledging, too, that we would use the balance of earnings or cash to pay down debt.
Got it. Okay. Thank you for that. You are still looking for coffee volume to decrease for the full year by low single digits, and I just wanted to explore this a bit more just because you have seen coffee volume actually increase despite the higher pricing more recently. So I guess with the understanding that elasticity has been modest as prices went up, why would we expect volume to weaken even as coffee shelf prices moderate from here? Maybe it is just conservatism at this point, but just curious on that.
Thanks so much. Andrew, it is Mark.
Thanks for the question. You are correct. Because the commodity has continued to be very volatile, which particularly this time of year is not unusual, we just feel that it is prudent, given not only the commodity, but category dynamics and the consumer environment, to just think about the coffee business from a prudent perspective. I would highlight that, as you pointed out, great results in the quarter on all three of our key brands with Bustelo growing, supported by the Game Face campaign around soccer, and then Dunkin' having relative pricing in line with where it needs to be. All of that has been supportive, but it is just, again, making sure that we are thinking about the go forward from a prudent perspective.
Got it. Yep. Makes sense. Thanks so much. Thank you.
Next question is coming from Peter Galbo from Bank of America. Your line is now live.
Hey, good morning, Mark and Tucker. Thanks for the questions. If I could pick up on coffee. I think there are quite a bit of investor questions just around how you're thinking about the recent run-up on, I guess, more speculative nature of Super El Niño at this point. There was a change in terms of how you have the outlook for the year on the pricing side, so actually expecting less of a headwind on coffee price for the year to go, I think, than previously. Just how kind of the recent movement coffee prices are impacting that decision. Had you planned a larger list price decrease now you're pulling back on trade promotion? Just any additional detail on how we might think about the price piece as it relates to coffee.
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