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Behind J.M. Smucker’s Waning Sales

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SJM’s sluggish sales trend

J.M. Smucker (SJM) has continued to disappoint on the sales front this year, having posted declines in sales for the past several quarters, and its tepid sales trend is likely to continue in coming quarters as well. Most of SJM’s peers are witnessing similar sales trends.

Packaged food manufacturers including Conagra Brands (CAG), Kellogg (K), General Mills (GIS), and Kraft Heinz (KHC) have also reported lower sales for the past several quarters due to declines in demand, primarily in the US (SPY).

However, amid these challenges, spices and seasonings leader McCormick (MKC), meat producer Tyson Foods (TSN), and confectionery giant Hershey (HSY) have bucked the sluggish industry trend and reported healthy sales growth.

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Dim near-term outlook  

J.M. Smucker’s sales are projected to fall in coming quarters. For 2017, SJM’s management has lowered its top-line guidance, following the company’s soft fiscal 1Q18 results, and now it expects sales to decline on a YoY (year-over-year) basis.

J.M. Smucker is witnessing challenges across all business segments, with its US Retail Coffee segment reporting lower sales due to unfavorable mix. This segment, in particular, is projected to report soft sales as the anticipated decline in volumes and unfavorable pricing will likely affect the segment’s performance.

SJM’s US Retail Consumer Foods segment is witnessing volume declines across several national brands, and the distribution loss in the key club channel will likely hurt its Pillsbury and Crisco brands’ performances in fiscal 2018. SJM’s US Retail Pet Foods segment is meanwhile taking a beating from rising competition among private-label players, mainly in the cat food category.

Given these persisting challenges, a recovery on SJM’s sales front looks far off, though higher net price realization is expected to bring some respite.

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