Coffee Service

JM Smucker boosts guidance on Q1 2021 sales and earnings growth

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August 25, 2020

The J.M. Smucker Co. boosted its guidance for the year as sales increased 11% from $1.77 billion to $1.97 billion for the first quarter of its 2021 fiscal year, with growth across all retail businesses supported by increased at-home consumption partially offset by reduced volume/mix for the away-from-home business.

The company, which owns Folgers, Unscrutables, Jif and other brands, now expects its full-year sales to be flat to up 1%, as opposed to previous guidance for a 2% to 1% drop, according to MarketWatch. It expects adjusted EPS to range from $8.20 to $8.60, compared with previous guidance of $7.90 to $8.30. Company shares rose 3% in premarket trade today and have gained 9% year to date.

The share price was $122 at 1 p.m. today, the year-to-date high.

"Our first quarter results exceeded our expectations, particularly for the coffee and consumer foods portfolios," Mark Smucker, president and CEO, said in a press release. "Consumers continued to seek out trusted and iconic brands as we achieved strong growth across nearly all our categories. This exceptional performance highlights the strength of our portfolio, the potential of our consumer-centric growth strategy, and our commitment to operate with financial discipline."

Gross profit for the quarter ending July 31, 2020 increased $75.8 million, or 11%, driven by the increased contribution from volume/mix and lower costs, partially offset by an unfavorable change in unallocated derivative gains and losses as compared to the prior year.

Operating income increased $103.5 million, or 40%, from $257.6 million to $361.1 million, primarily reflecting the increase in gross profit and a $23 million decrease in selling, distribution and administrative expenses.

Net income per diluted share was $2.08 compared to $1.36 in the year-ago period, a 53% gain. Adjusted earnings per share was $2.37, a 50% increase over last year's $1.58.

Adjusted gross profit increased $88.6 million, or 13%, with the difference from generally accepted accounting principles results being the exclusion of unallocated derivative gains and losses. Adjusted operating income increased $113.8 million, or 39%, further reflecting the exclusion of other special project costs and amortization.

Net sales for retail coffee grew $105.2 million, reflecting a 23% increase from volume/mix. Favorable volume/mix was driven by Dunkin' Donuts, Folgers and Café Bustelo coffee, reflecting elevated at-home consumption and re-stocking of retailer inventory following the surge in consumer demand in the fourth quarter of the prior year. Net price realization was neutral.

Net sales for U.S. retail consumer foods increased $87 million from $402.2 million to $489.2 million, reflecting a 19% increase from volume/mix driven by growth for the Smucker's brand, inclusive of Uncrustables frozen sandwiches and fruit spreads, Crisco oils and shortening, and Jif peanut butter. The increase in volume/mix includes growth due to elevated at-home consumption and retailer inventory re-stocking following the surge in consumer demand in the fourth quarter of the prior year. Higher net pricing increased net sales by 3%, primarily attributable to reduced promotional activity for Jif peanut butter and Smucker's fruit spreads.

U.S. retail coffee profit increased from $128.9 million to $182.6 million, while U.S. retail consumer foods profit jumped from $81 million to $131.5 million.

The outbreak of COVID-19 continues to impact financial results and cause uncertainty for the full-year fiscal 2021 projections. This guidance reflects expectations based on the company's current performance and understanding of the overall environment.

Net sales are expected to range from flat to up 1% compared to the prior year. This reflects elevated at-home consumption and retailer inventory re-stocking in the first quarter primarily benefiting the U.S. retail coffee and U.S. retail consumer foods segments, with net sales growth anticipated to moderate throughout the remainder of the fiscal year. This net sales growth will be partially offset by a decline for the company's away-from-home business and the lapping of a $185 million incremental benefit to net sales related to COVID-19 in the fourth quarter of the prior year.

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