- Earnings call transcript Q2 2023

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Operator

Good morning, and welcome to The J.M. Smucker Company's Fiscal 2023 Second Quarter Earnings Question-and-Answer Session. This conference is being recorded. [Operator Instructions] I will now turn the conference call over to Aaron Broholm, Vice President, Investor Relations. Please go ahead, sir.

Aaron Broholm

you session. our thank quarter XXXX and question-and-answer earnings morning, for fiscal joining second Good everyone a and hope website in which I had available at this as our are morning's detailed jmsmucker.com. results press our release on management's remarks, chance prepared corporate to review

of We also conclusion audio Q&A session. this call replay will morning's of an at post this

and results performance. During expectations about current differ today's reflect These rely to uncertainties. that statements our risks call, actual we statements may estimates, on due materially assumptions plans may make and and forward-looking and future

use Mark Financial Additionally, morning's on this I disclosure Chair Officer. President Board, Smucker, Chief our read Executive results concerning we you full are in measures press non-GAAP of and internally. the release. to evaluate the Tucker Chief details Marshall, non-GAAP and encourage Participating performance forward-looking on Officer; and statements call to this

now We question. the please first questions. for the will up open queue up Operator, call

Operator

comes [Operator Barclays. today Instructions] Lazar Our from first question from Andrew

Andrew Lazar

Basically, range? gross full more of end importantly, excluding what a the trends at get again, of start previous maybe And sequential highlight of margin, just to get I from adjusted in have understanding now and trying quarter, hoping what whether excluding to year an caused looked if the have the sense fiscal a Jif XQ, sort that on of Jif impact the I'm recall? the would guess I like? to to been trying gross a what the was move improvement like margin underlying look margin could. from recall gross we low off margin would the gross

Tucker Marshall

peanut basis the there to was Andrew, as second product impact good point Jif recall. a the result morning. about a quarter believe XX of butter We

for also accounts really our it in we due to we XX.X% also goods XXX outlook XX.X%. we have full to also the would on peanut and recall. confident have Again, for business that fiscal that cost We the point compared profit mid-to-high material a we in volume sold margin a increases as focused does in have of remain told the impact of And cost gross the gross I would and gross full where our profit the butter product seeing year have the very year-over-year for So reported. XX.X% acknowledge we teen margin margin at been the folks total that would inflation that on be year. for mix impact that basis are

fourth anticipate second and gross As we margin the through would improve, gross we third quarter. with our work continue best the quarters, to margin the quarter being

Andrew Lazar

there a conservatism Great. is environment through continues to less to And still full Or year you discrete then fiscal in reasons EPS. given any dynamic built are for flowing be? XQ this? I the in, just guess, bit the upside are what you than some how saw perhaps the

Tucker Marshall

we're Andrew, to take our able line bottom and up. both guidance top line pleased to be

me begin top the line. Let with

think to for earnings of along expected. per basis bottom on to line you of portfolio XXX points, coming up our portion portfolio want the volume our by mix to midpoint our And and business top bottom our to SD&A reported quarter due We was guidance going the the I the line share, that out coffee and playing you and that causing quarter. $X.XX, the to SD&A are additional $X.XX midpoint both top up $X.XX now as benefit coming expectations first was new across then of translate consumer continued for line of to due what are up as with improvement previous also of benefit line outlook compared as taking again, things. points taking at for initiatives. out is second $X.XX basis. our really as our offset that the uplift, through is third $X.XX over-delivery really reverse approximately that the of investment broken the pet down One, momentum that will quarter two of quarter, range, basis And well, do third the $X.XX by it's the primarily X% adjusted call a expenses in timing XXX portfolio to out But When into from the we

Operator

of from coming Bank next Peter Galbo The question America. is today from

Peter Galbo

is you volume you assume had expected could raise points of a we bit the hadn't year. I that on make for had said maybe revised the price number on to fair top just I top just or wanted that side? unpack the you sure moved. about the mix line that, it the to Tucker, really full Is previously, line. that think XX

Tucker Marshall

It's by That portfolio. our is mix across correct. largely driven volume

Peter Galbo

coffee then we And if I to over. green a bit maybe Okay. about costs costs, started have talk could think little coffee. roll Coffee just

seeing the that just brought up start gross the so if expect to through gross flow of to when timing. margin change impact some benefit bit that prices of might kind coffee the on a and there's understanding rolled we And margin? side, But Andrew of have

Mark Smucker

Thanks the Mark. it's question. Peter, for

cost largely through will realize pass-through time the Just we as or on we pass them. at it's category, we say always coffee, increases a we decreases that -- and

do case. be how we I just through. continues also a transparent our ensure recovering we although I guess that hedging we to been we take strategy those our when practices, with cost. and are costs highlight that the so That approach would And to are prudent pass has very not dollar-for-dollar to

And we top in to the up and of performance to continue meet our well price important. across competitive pricing, to the ability have on see so the aggregate entire in our value share spectrum way gaps consumers growth as and did seen satisfactory. been be continued very portfolio close line the Obviously, as growth, as now has continues lead we solid

Tucker Marshall

costs and then moderate you want first to for highest begins remind to also year-over-year I green quarters us that second in fourth the and Peter, quarters. for the it third and And coffee the

improve As through as profile changes. the year-over-year into those step we anticipate business to such, the we into quarter coffee as and continue to second our fourth the quarter you work should margin within

Operator

Next is coming Goldman JPMorgan. from question from Ken today

Ken Goldman

I'm a that the go brands curious, Can back then cleanly. model there's a your for us clearer sense in dollars I of in do are the some little a dollars like of fourth of we bit expected what sort of just get the might third because of look where It marketing versus categories quarter the shift? quarter in to just help guess terms more half such a to expect you of these little And or year?

Tucker Marshall

good Ken, morning.

spend the that net second our And committed to into sales budget. building our in is acknowledging our marketing that business acknowledging was brands, against to remain Just the quarter we trending continue a there some favorability reinvesting X.X% we third support just in timing quarter. of and

that the We slightly the flow in will as for be quarter the about year. above modeling X.X% and you think

Ken Goldman

earnings, raised not for outlook cash You for flow. free CapEx or but your

prior higher incrementally what's keep offsetting kind operating cash perhaps So income versus for in constant negative of free cash net expectation? your that's that will that flow expectation

Tucker Marshall

That our the outlook guidance Ken, to year. our for the the maintained predominance cash fiscal not take of Uncrustables year. strategic forecasted $XXX fiscal we And largely at estimated in growth an expenditure so was support acknowledging free payment our tax million cash of up. around we additional brand. Again, flow then due we that in for is capital that did the

Operator

is question Suisse. from Next Moskow coming Robert from Credit

Robert Moskow

of in there slowdown actually single-serve your you about looking through Are looked a going what's sales. if pretty it talk significant is good like for And Just it? reflection our so, was the data, you drivers on? -- Nielsen a tracking coffee can that

Mark Smucker

Sure, Rob. This Mark. is

you may very this of of penetration been look coming the several grown as behavior watch the folks We the Obviously, ensuring brewers coffee. We that back Keurig quarters. in brewer over think little coffee more some We on brewing highlight consumer bit K-Cup. drip view of that did to of at see last don't I have needs notion significantly all sustainable trend. we're total you There shift, necessarily when has a a a consumers. closely. category the addressing as

So premium a a bit to the our we would across to be that time little benefit us. would in opposed that of continue specifically. brands and expect would as over deceleration coffee, segment There was

gaps price premium coffee again, in so, the have And space continued close. to

to And quarters so subsequent our expect growth as well continue over see to business we single-serve our business. the Dunkin' for would as

Robert Moskow

just a follow-up. Okay. And

and You've flow-through taking you're prepared more environment you said in differently this specific time is fall advance steps so doing you're something that the it. seamless? to actually, more you months several coffee Can I think, to that maybe for where costs prepare for be as more are for an

Mark Smucker

coffee record so we costs, thing haven't remind first everyone a to the we that decade Well, ago. that seen is tried saw we or like

has as And we've -- has the been the it so playbook the remained environment through managed same.

same whether activity a we very prudent being about that continue thinking about normalized the promotional We pricing, through always against those to way. activities in would, that's execute passing being

importantly, inflation. the even words, in significantly, continuing brands then maybe And very So in and in other of invest out not our period most of to ordinary. a

support and continue customer continue -- we served And the well, which a balancing will that and the so and to of in both and has it consumer we ways just approach, always do that taking we've Rob, our take so. pricing, volume mix the approach, balanced brands, to to our with us got believe

Operator

coming from Chris Growe Stifel. is Our from next today question

Christopher Growe

just point second to you basis just there in on inflation to I the on inflation And any what pricing had year? on with question dollar that, quarter? that the second earlier you in you that inflation. expect gotten first is follow-up an on question -- for you the could a offsetting pretty how much to Is if Have line a of for in well a Is bit quarter? cost I add realized yet? a nuance

Tucker Marshall

put the to fiscal that So our impact a that beginning that say second basis recovering of our fiscal coffee. the green we on in what primarily the as recovered prior to of come space, did in quarter would level year. believe cost the inflation a are year that is so we through due higher is, our pricing green of actions predominance inflation we place Chris, the coffee dollar-for-dollar We, inflation, the and we we have of

Christopher Growe

Is that Tucker then, pricing Overall than to comment for correct? the offset place just inflation. that And you company, have more in coffee. was

Mark Smucker

Correct.

Christopher Growe

chain I manufacturing gross supply of I'm what could, would couple gross And if sort areas lower think from have Like seeing I much company chain get if follow-up every gross what you here just higher drag the perhaps your of chain that question, in normalized seen today from to coffee about had -- Okay. volume margin. then could, these it consumer. that think guessing a you business talked well? challenges in and I be And to, you're Is where if supply I more and you ongoing improve has costs, challenges? as to one margin of a about supply like I'd degree how the a environment? you can margin mentioned

Tucker Marshall

the And really, what XX.X%, Chris, It peanut does inflation. year that the have as of environment. sell more business full as particularly profit mix that reflects cost reflects acknowledges it the also about volume we butter the outlook component food. recall. the a year-over-year pet of has the evolved, It at gross input supply think Jif profile our you chain impact again, margin of for is,

experience continue and so will our bring when gross as we time. as supply chains stability as we of continuous profit transformation guidance. but the But that's of the the within moderation front, improvement we in that, the result along of such over those strategy company margin a deflation, to forward we all all the growth as on particularly the to continue And support margin to or advance and also begin even office, company, we programs when profile see comprised move cost as

Operator

Next from from Steve coming question Bank. is Deutsche Powers

Steve Powers

year. to higher just you line reason volume may of outlook your just top end but prior lower same on And but clarify gross mix that better, inflation related sort to pricing year, for the the profit is cited largely you this, unchanged mix have margin in addressed dollar-based moving seem in the is and also have given because just volume you full just I the of to primary year coming on wanted the range, the cited

XX.X% a that unpack Is that to understand the Just on mentioned? just the we shift better move line. gross pet food the alongside you more? the just could top so to you lower margin bit So mix that year,

Tucker Marshall

Yes.

line, that I think as full and business we up And account the through and due reflects the we to acknowledging consumer, best the into for mix. top XX.X% the of uplift across by some SD&A. back our again, took $X.XX growth our took portfolio partially fiscal embedded and pet outlook therefore year, half fiscal the offset that's volume being our all the and that's in investments year

Operator

coming Next Jason Goldman Sachs. from question from is English

Jason English

A questions. quick couple of

in coffee your mentioned prices to you your until You see deflation. confidence ability hold the

now, a from hold you to that's gaps are price the competitors for see be couple quarters are? they able are long, you where you with of do Assuming for continue to that from raise gaps today? close happy to to prices Or where and need

Mark Smucker

for the most the seen gaps Jason, part, we've close.

entire space seeing continue a indicative As as that earlier our weeks, to just the be been in little bit these those segment brand. maybe an I we're and in gaps over close the will on last again, mentioned that of the to of case. now premium -- the several shift think has question, opposed premium, we And

will So gaps those closed well. as line the as have the we that back think meaningfully competitive mainstream have come in in space gaps

entire to portfolio value of So will just continuing leverage the spectrum, spectrum to the us. well our for bode continue

Jason English

Okay.

to So understood. paraphrase just make real to I sure quick

to expect seen need to see them close, -- the You've close but gaps further. you you

Is do that you further need So conversions? correct?

Tucker Marshall

premium, -- the I premium competitive seen; to we have to In think in segments, closed we dynamics no, the the no. that have expect would most on largely and normalize. extent Well, they

Jason English

the There's Got coming to environment? How worth $X.X it. pet. online next you in do the in U.S. And pet on of quickly capacity expect impact year. that about billion competitive

Mark Smucker

industry been, would that highlight general, pet as there an chain in Well, know, you supply some have is that's across I challenges comment. what and first,

as some us have portfolio there continued very and optimizing allowed and pet growth very -- dog some particular in to stabilization know, on the dynamic. We you that has as And well snacks space. performed capture throughout fare well to in has optimization, our primarily, the on food. value has our cat and experienced portfolio, in food focus well been And focusing moderate our food as dog the

is focused the So day, pet in our continue remain on we snacks of we've the to then lead again, talked food the at and playbook end to previously the got fruit. that ability and that's where to we have dog portfolio yielding because executing

Operator

Our Instructions] is [Operator question Cody from Ross from UBS. next coming

Cody Ross

that's EPS earlier, bit more? that Tucker, I around impact just I perhaps just responses just quantify is What back one from you a go you to the XQ? unpack SD&A to bit a XQ shifting a want from gave for of expenses. the $X.XX little believe And little us? just shift. Can to can you it

Tucker Marshall

the that timing delivery impact of mix portion that And making. of of now will quarter also additional third office. that our quarter. some would into then a over second I example to $X.XX due transition would our due $X.XX the investments Cody, business in in was to acknowledge top SD&A, the the line we and of support to improvement new of $X.XX An are largely is due to that transformation volume be

the fourth fall will quarter, So of in a from have you then timing of portion into quarter quarter SD&A and previously the second in a planned portion your the investment third will your $X.XX incremental you already third. have

Cody Ross

helpful. real pivot I back your then pet That's segment. just quick, to And to want

a between three-year You decelerated and based What quite stack Nielsen consumption in by the grew shipments calculations roughly your it the our is substantial. on today? is XX% organically, points causing on But X growth trailed quarter basis. mismatch which and

Mark Smucker

pet me amount category gained Xx we share. at Cody the Well, a grew snacks rate -- and meaningful in just of our pet business again, let start with snacks, at

premium snacks, is innovations against in performance. to pleased the relative hinges a our with biscuit first you both primarily core And well the foremost we've So growth snacks as Meow growth business launched as in the on Mix that is on strategy very deny our that the space. where comment XX our significant XX quarters. And we're that pet last and our can't of of

our as executed really and have expectations. would had focused performing the have cases, is and exceeded in portfolio many expected we where So we strategy, exactly our

Operator

is from BNP coming from Paribas Next question Exane. Max Gumport

Max Gumport

impact feel consumer of of any down are elasticities these the categories share? see in signs similarities the to the economic trade starting so, With to more an price more hit and are emerging environment, significant you any categories? And there price increases continuing shelf if from that or

Mark Smucker

highlighting I our Max, have start private in categories this is under-index we particularly relative in that categories by Mark. to that would very are label. advantaged, the -- fact we those as

private chain chain that seen the the had is many the during growth of store some for the brands pandemic share so in they attributable And extremely the of remain better share them of to bit had has recapture you've supply supply categories to and return some fact or those challenges that a our and that pandemic. label some in the overall, the gotten lost strong. brands has allowed But

brands portfolio Our of number the be different strong their them. fact the deliver spectrum, consumers the that find meet continue our in to provide and to able a brands -- for remain options we and budget will value can value that across consumers ultimately with

So and to in that confident our we consumers' ability our needs very spectrum. to strategy remain continue meet across

Max Gumport

And one follow-up.

reduced for to your SKU for by of the growth fruit XX% count in continued Smucker’s category improved and order profit, recently leadership. You business position opportunities spreads the

you've in you seen You up velocities remarks discuss what that are XX%. this your from so far? prepared other mentioned Can adjustment impacts

Mark Smucker

a that is you significant the our Well, it's had over got portfolio. what thank I'd our as top highlighting strategic business, came which and much at items, we And business line. It's has it obviously count to that. namesake looked comes true first, that reduced we realize SKU saw core focused. And our from of both but a a of that flow course, basically, our of SKUs. back to and bottom not very not benefited And you the That said strategy and back benefit into we about we've is to proliferation ultimately of again, business. years, for significant actually stand like -- it, we largest a being more optimization significant

Operator

end reached We’ve like you. to comments. turn the Thank or further closing to I'd back any our session. question-and-answer of floor for over management

Mark Smucker

to with time all, holiday morning taking on everyone on being on Monday for a of for a first early the I'd Well, us. like week thank

the at Just and that day a every tribute our we've employees had who, really a and tirelessly to and very another of with fact results appreciative the of strong are our quarter, execute end lot responsible of the that's for day, passion.

want then really And Wednesday, them I for all York. on forward So great to to seeing results. you thank Investor December New XX the really we Day, which of look in our is

additional and for So holiday to great a Thanksgiving Have you reach any week. of Aaron. wish very day. a all details, a happy out can you We great

Operator

teleconference does That today's and you. Thank conclude webcast.

disconnect today. may We and at have your thank You you participation for lines wonderful this a your day. time,

The J. M. Smucker Company (SJM) 21 Nov 222023 Q2 Earnings call transcript