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Why J.M. Smucker's Fiscal 2Q18 Results Could Be Disappointing

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Part 3
Why J.M. Smucker's Fiscal 2Q18 Results Could Be Disappointing PART 3 OF 5

Why J.M. Smucker’s Fiscal 2Q18 Sales Could Fall

What analysts expect

Analysts covering J.M. Smucker (SJM) stock expect the company to report sales of $1.9 billion in fiscal 2Q18, reflecting a decline of 1.0% on a YoY (year-over-year) basis. A continued decline in the US Retail Coffee and US Retail Consumer Foods segments coupled with an unfavorable mix is anticipated to hurt the company’s top-line performance.

Why J.M. Smucker’s Fiscal 2Q18 Sales Could Fall

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In comparison, the company’s peers including Hershey (HSY), Kellogg (K), Mondelēz (MDLZ), and Kraft Heinz (KHC) have reported improved top-line growth during their last reported quarter driven by favorable currency rates and a slight improvement in volumes. However, sluggish industry trends in the US (SPY) and increased competition remained a drag.

Meanwhile, Conagra Brands (CAG) and General Mills (GIS) continue to report lower sales, reflecting lower volumes.

What could impact SJM’s sales?

The company is witnessing lower volumes in its coffee segment, which is projected to hurt the overall sales of the company. In addition, the adverse mix is more than offsetting the benefits from higher net price realization. During the last reported quarter, the company’s management stated that the Folgers brand within the US Retail Coffee segment is witnessing improved trends on account of price restructuring and merchandising efforts, which should help the top-line growth rate.

Meanwhile, in the US Retail Consumer Foods segment, distribution loss in the club channel is expected to hurt the Pillsbury and Crisco brands. Also, increased competition from private label players in the value segment of the Cat Food category is likely to hurt sales growth.

The company expects its fiscal 2018 sales to fall on a YoY basis given the near-term challenges. Lower volumes, an adverse mix, and increased competitive activity are projected to remain a drag.

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