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What Could Impact J.M. Smucker’s Sales in Fiscal 2018?


Jun. 29 2017, Updated 7:44 a.m. ET

Lower volumes remain a drag

J.M. Smucker (SJM) has posted a sales decline in all four quarters of fiscal 2017, and the first half of 2018 might not be any different. The rate of decline improved somewhat in the recent past, as you can see in the graph. However, industry-wide softness, tough YoY (year-over-year) comparables, and volume declines in the U.S. Retail Coffee and U.S. Retail Pet Foods segments will result in a muted sales performance, at least during the first half of 2018.

In comparison, packaged food manufacturers in the United States (SPY), including General Mills (GIS), ConAgra Brands (CAG), Kellogg (K), and Campbell Soup (CPB), are also expected to post tepid sales growth due to weak consumer uptake.

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Segment details

J.M. Smucker is witnessing volume declines across all its segments except International & Food Services. Sales for its U.S. Retail Coffee and U.S. Consumer Foods segments fell during the last reported quarter as lower volumes and mix more than offset its higher net price realization. U.S. Retail Pet Foods also declined, reflecting a fall in volumes and lower net price realizations driven by increased competition. That will likely continue in the first half of the current fiscal year since continued softness in the food industry will impact these segments’ volume growth. However, a higher net price realization could somewhat offset the fall.

As for the International & Food Services segment, it showed improved sales during the last reported quarter due to higher volumes. Going forward, sales in this segment will likely benefit from increased volumes. However, a lower net price realization and adverse currency fluctuations might dent the results.

The company’s management is projecting its overall sales to rise 1.0% in fiscal 2018. The top line is expected to benefit from a higher net price realization as volumes remain soft.


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