The J.M. Smucker Co. announced results for the fourth quarter of its fiscal year ending April 30, 2023.
Summary
- Net sales were $2.2 billion, an increase of 10%. Net sales excluding the impact of divestitures and foreign currency exchange increased 11%.
- For the fiscal year, net sales were $8.5 billion, an increase of 7%. Net sales excluding the impact of divestitures and foreign currency exchange increased 9%.
- Net loss per diluted share for the quarter was $5.69, reflecting a loss related to the divestiture of certain pet food brands. Adjusted earnings per share was $2.64, an increase of 18%.
- For the full year, net loss per diluted share was $0.86. Adjusted earnings per share was $8.92, slightly ahead of the prior year.
- The company provided its fiscal year 2024 outlook, with an expected comparable net sales increase of 8.5 to 9.5%, adjusted earnings per share to range from $9.20 to $9.60, and free cash flow of $650 million.
Mark Smucker, chair of the board, president and chief executive officer, said in the announcement: "Our strong fourth quarter and full-year results demonstrate the execution of our strategy and consumer demand for our brands. During the quarter, we made meaningful progress in our effort to reshape our portfolio with the completion of the divestiture of certain pet food brands, while also returning significant cash to our shareholders.
"Looking ahead to fiscal year 2024, we are focusing on sustaining our business momentum by investing in growth platforms, such as Uncrustables sandwiches and Milk-Bone dog treats, and supporting our talented employees whose hard work and dedication have been instrumental to our success. We are confident in our long-term strategy of leading in the attractive categories of pet, coffee, and snacking and delivering shareholder value."
Fourth-quarter consolidated results
Net sales
Net sales increased 10%, including a 1% favorable impact of lapping customer returns related to the Jif peanut butter product recall. Excluding noncomparable net sales in the prior year of $12.2 million from the divested pet food brands, as well as $7.7 million of unfavorable foreign currency exchange, net sales increased $220.9 million, or 11%.
The increase in comparable net sales was driven by an 11 percentage point increase from net price realization, primarily reflecting list price increases for each of the company's U.S. retail segments and for international and away from home. Volume/mix was neutral compared to the prior year.
Operating income
Gross profit increased $125.7 million, or 19%. The increase reflects a favorable net impact of higher net price realization and increased commodity and ingredient, packaging, and manufacturing costs and favorable volume/mix. Operating income decreased $935.5 million, primarily reflecting a pre-tax loss of $1.0 billion related to the divestiture of certain pet food brands and a $23.4 million increase in selling, distribution, and administrative ("SD&A") expenses.
Adjusted gross profit increased $116.7 million, or 18%, with the difference from results based on generally accepted accounting principles (GAAP) being the exclusion of the change in net cumulative unallocated derivative gains and losses and special project costs. Adjusted operating income increased $57.3 million, or 16%, further reflecting the exclusion of the pre-tax loss related to the divestiture of certain pet food brands, amortization, and other special project costs.
Fourth-quarter segment results
U.S. retail coffee
Net sales increased $45.3 million, or 7%. Higher net price realization increased net sales by 10 percentage points, primarily reflecting list price increases across the portfolio. A reduced contribution from volume/mix decreased net sales by 3 percentage points, primarily driven by roast and ground coffee.
Segment profit increased $35.9 million, primarily reflecting lower marketing spend and a favorable net impact of higher net price realization and increased commodity costs.
U.S. retail consumer foods
Net sales increased $56.1 million, or 14%, including a 5 % favorable impact of lapping customer returns related to the Jif peanut butter product recall. Higher net price realization increased sales by 12 percentage points, primarily reflecting list price increases across the portfolio and lapping the impact of customer returns in the prior year related to the Jif peanut butter product recall. Volume/mix increased net sales by 2 percentage points, primarily driven by Smucker's Uncrustables frozen sandwiches, partially offset by a decrease for Jif peanut butter.
Segment profit increased $8.4 million, primarily reflecting favorable volume/mix, partially offset by increased marketing investments. Segment profit also reflects lapping the prior year impact of unsaleable inventory, customer returns and customer refunds, mostly offset by an insurance recovery related to the Jif peanut butter product recall. Excluding these noncomparable items, the net impact of higher net pricing and increased commodity and ingredient, manufacturing, and packaging costs was slightly unfavorable.
International and away from home
Net sales increased $32.4 million, or 12%. Excluding unfavorable foreign currency exchange of $7.7 million and $0.2 million of noncomparable net sales in the prior year related to the divested pet food brands, net sales increased $40.3 million, or 15%. Comparable net sales increased 25% and 4% for the Away From Home and International operating segments, respectively. Net price realization contributed a 13 percentage point increase to net sales for the combined businesses, primarily reflecting list price increases across the portfolio. Volume/mix increased net sales by 2 percentage points, primarily driven by coffee and frozen handheld products, partially offset by baking mixes and ingredients and fruit spreads.
Segment profit increased $13.1 million, primarily reflecting a favorable net impact of higher net price realization and increased commodity costs.
Full-year outlook
Comparable net sales are expected to increase 8.5 to 9.5% compared to the prior year. This reflects favorable volume/mix from underlying business momentum, as well as higher net pricing. Net sales are expected to decrease 10.0 to 11% compared to the prior year, which reflects $1.5 billion of net sales in the prior year related to the divested pet food brands.
Adjusted earnings per share is expected to range from $9.20 to $9.60. This range reflects the benefits of favorable volume/mix and higher net pricing actions, partially offset by increased SD&A expenses. The adjusted earnings per share range also reflects a net impact of approximately $0.60 related to stranded overhead from the divestiture of certain pet food brands, inclusive of income and reimbursements from transition services and co-manufacturing agreements.
