J.M. Smucker Posts Double-Digit Profit Gains Following Acquisition of Hostess Brands

The J.M. Smucker Company surpassed analysts’ projections in reporting a 15% year-over-year increase in adjusted gross profit for the quarter ended April 30, as price hikes and lower input costs helped offset a slump in sales.

“Our transformed portfolio, including the acquisition of Hostess Brands during the fiscal year, has strengthened our business for long-term profitable growth across our key platforms of coffee, Uncrustables frozen sandwiches and sweet baked snacks,” said president and CEO Mark Smucker in a prepared statement.

According to CFO Tucker Marshall, the increase in gross profit primarily reflects a favorable impact from the acquisition of Hostess Brands, lower costs, higher net price realization and favorable volume/mix, partially offset by the impact of divestitures.

Operating income increased $1.04 million as a result of the lapping of a prior-year pre-tax loss of $1.02 million related to the divestiture of certain pet food brands and the increase in gross profit, partially offset by a $48.9 million increase in selling, distribution and administrative expenses.

Meanwhile, net sales were $2.2 billion, a decrease of $29.1 million, or 1%. Net sales for the quarter excluding the acquisition, divestitures and foreign currency exchange grew 3%.

As many consumers continue downtrading to private label across grocery categories amid lingering inflation, weaker demand caused all of the company’s product segments to see single-digit sales declines in the quarter.

In U.S. retail coffee – which includes the Folgers, Café Bustelo and Dunkin’ brands – net sales slid 4% to $26.4 million. Net price realization decreased by two percentage points primarily driven by list price decreases and partially offset by reduced trade spend. Segment profit increased $10.2 million, fueled by lower commodity costs, partially offset by lower net price realization and increased marketing and distribution expenses.

Folgers mainstream roast and ground coffee declined due to increased competitive activity and lapping strong promotions in the year prior as the company passed through the benefit of lower coffee costs.

On the frozen handheld and spreads side, quarterly net sales decreased by $2.9 million, or 1%. Segment profit fell $7.6 million, mainly due to pre-production expenses related to the new $1.1 billion Smucker’s Uncrustables manufacturing facility in McCalla, Ala.

The company has continued to invest in its Uncrustables business, growing the brand by over $100 million in FY 2024 while expanding distribution and introducing the products in Canada.

“As you look at consumers in certain segments, particularly coffee and peanut butter, they’ve been seeking value, and that has created some competitive environments which we think will normalize over time. But we view it as our responsibility to be prudent and balanced in terms of where we invest,” Smucker told investors during today’s call.

In the Sweet Baked Snacks segment, J.M. Smucker said the company is “overall pleased” with the progression of integration and its performance following the acquisition of Hostess Brands, even though net sales were below expectations. During the quarter, J.M. Smucker expanded its leadership in donuts with the opening of its latest facility in Arkadelphia, Ark., dedicated to producing Hostess Donettes. The segment contributed net sales of $337 million and segment profit of $70.2 million.

As a result of the integration – with the majority of its cost synergy analysis and organization design completed – the company anticipates achieving cost synergies of approximately $100 million by the end of fiscal 2026.

Looking ahead, FY 2025 net sales are expected to increase between 9.5% and 10.5%, reflecting a full year of net sales from the Hostess Brands acquisition as well as favorable volume/mix and higher net price realization. Adjusted earnings per share (EPS) is expected to be $10 at the mid-point of the company’s guidance range.

“Fiscal year 2025 will be a year of investment behind our brands and capabilities. These investments are essential to support sustainable long-term growth for the company,” said Smucker. “Our ability to deliver continued growth and increase shareholder value is grounded in our focus on the execution of our strategic priorities and continued performance across our key platforms.”