J.M. Smucker Co. Reports Q2 Earnings, Raises Guidance For 2022

The J.M. Smucker Co. announced the results of its Q2 2021 earnings this week, highlighting a 1% increase ($16.0 million) in overall net sales and strong, positive momentum behind its food, coffee and pet product brands. Each segment outperformed expectations, according to Mark Smucker, President and Chief Executive Officer, which led the company to raise its full-year guidance for 2022.

The company’s comparable net sales grew 8% which is not inclusive of sales from the divested Crisco and Nature’s Balance businesses last December. Smucker’s said it successfully offset a decline from the divestment and continued to mitigate supply chain challenges by raising prices early in Q1.

“Our second quarter results, including comparable net sales growth of 8 percent, exceeded our expectations and demonstrated sustained momentum for our business and strong execution by our talented employees in what remains a dynamic operating environment,” said Mark Smucker, President and Chief Executive Officer in a press release.

Smucker’s gross profits took a hit, decreasing 13% compared to the prior year which the company attributed to higher costs throughout its supply chain. The company also reported a decrease in cash from operations, down 56% to $165.1 million and a drop in free cash flow, which declined by $220.4 million compared to 2020 results.

However, Smucker remained optimistic about this quarter’s growth, noting that those early price increases are starting to benefit the company as it enters Q4. In a prepared statement to investors, he said that Smucker’s brands will continue to mitigate supply chain pressures with “justified pricing actions including list price increases, trade spend optimization, and revenue growth management strategies, as well as productivity initiatives.”

“We delivered robust organic top-line growth across each of our segments, reflecting consumers’ continued desire for our brands and the successful implementation of initial pricing actions,” he continued.

According to its CEO, since the last quarter Smucker’s has experienced rising costs in coffee and transportation, with additional price increases expected to go into effect across its coffee and pet products portfolios. On an earnings call with investors, he emphasized that cost-related inflation will continue to escalate and impact pricing for the remainder of this fiscal year, but stated that looking beyond the current state of supply chain challenges to anticipate the impact throughout FY 2022 “is not prudent at this time.”

“Clearly we are operating in a very dynamic environment,” he added. “I think fundamentally the reason we have continued to deliver is because our execution has been excellent. Our people have been extremely agile and have been able to pivot and react, and in many cases, anticipate challenges, before they happen so it’s a combination of detailed supply chain management.. and both marketing and sales execution working together in concert.”

Looking forward to 2022, the company adjusted its full-year fiscal guidance with consideration to the current state of manufacturing and supply chain disruptions.

J.M. Smucker Co. expects comparable net sales to grow 4.5% in 2022, hitting the midpoint of its predicted range, as it believes the trend of at-home consumption will remain elevated with growth further offset by recent price increases. The updated guidance projects that adjusted earnings per share will fall somewhere between $8.35 to $8.75.

“We are pleased with our ability to increase our net sales and adjusted earnings per share expectations for the fiscal year despite increasing cost inflation and continued supply chain disruption,” Smucker said in a statement to investors. “We remain confident that the actions we are taking to execute our strategy are positioning us to deliver sustainable growth and create shareholder value over the long term.”

Last week the company announced plans to begin construction of a new $1.1 billion facility in McCalla, Alabama which will exclusively manufacture its Uncrustables sandwiches. The new facility will be constructed in three phases and is expected to create up to 750 jobs upon its completion.

Uncrustables reported approximately $140 million in net sales in Q2, marking the 30th consecutive quarter for growth, according to Smucker, and is expected to surpass $500 million this fiscal year.

“This is fundamentally about our strategy of investing where the growth is,” Smucker said on an earnings call. “We have talked about reshaping our portfolio, which is not only about M & A, but also about making sure we are putting resources against our largest opportunities and Uncrustables is clearly one of those. The Alabama facility will support further growth which we believe could be north of $1 billion and the reason to believe is that there is just still a ton of runway for this brand.”