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A Closer Look at J.M. Smucker’s Q2 2019 Results

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Lower pricing took a toll on sales growth

The J.M. Smucker Company (SJM) reported net sales of $2.0 billion in the second quarter of fiscal 2019, which fell short of analysts’ expectation of $2.1 billion but rose 5.1% YoY (year-over-year).

The company’s top line benefited from incremental sales related to its Ainsworth acquisition, which contributed 6% to its top line growth rate. Meanwhile, its volumes improved 1%. However, lower net price realizations across all its business segments adversely impacted the company’s top line growth rate. Its net pricing fell 2% in the reported quarter.

Sales in the company’s US Retail Coffee segment fell 1%, primarily due to lower net price realizations. However, increased volumes in its 1850, Café Bustelo, and Dunkin’ Donuts brands supported its top line.

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The company’s US Retail Consumer Foods segment’s net sales fell 12%, primarily due to its divestiture of its US baking business. However, excluding the impact of divestitures, its net sales rose 1% driven by growth in the Smucker’s, Jif, Uncrustables, and Crisco brands. However, lower pricing for peanut butter and oils remained a drag.

The US Retail Pet Foods segment’s net sales rose 32%, primarily driven by the Ainsworth acquisition. Excluding the Ainsworth acquisition, its net sales fell 1%. The International and Away From Home segment’s net sales fell 2%, reflecting lower pricing and adverse currency rates.

Bottom line fell short of the estimate

SJM reported adjusted EPS of $2.17 during the quarter, a rise of 7.4% YoY but short of analysts’ consensus estimate of $2.34. The company’s lower pricing negatively affected its bottom line growth. However, cost savings supported its EPS.

SJM’s management lowered its fiscal 2019 adjusted earnings outlook to $8.00–$8.20. Earlier, it had expected its earnings to be in the range of $8.40–$8.65.

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