SJM Q2 Deep Dive: Flat Sales, Margin Pressures, and Coffee Tariff Headwinds

Packaged foods company J.M Smucker (NYSE:SJM) met Wall Street’s revenue expectations in Q2 CY2025, but sales were flat year on year at $2.11 billion. Its non-GAAP profit of $1.90 per share was 1.4% below analysts’ consensus estimates.

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StockStory’s Take

J. M. Smucker’s second quarter results were met with a negative market reaction, reflecting investor concern over flat sales and margin compression. Management pointed to ongoing challenges in key categories, notably weaker sales volumes and higher input costs. CEO Mark Smucker highlighted the impact of increased tariffs on green coffee and shifting consumer habits, especially in discretionary categories like pet snacks, as key factors weighing on performance. Additionally, Sweet Baked Snacks faced volume headwinds due to SKU rationalization, while the company’s efforts to optimize pricing in coffee partially offset cost pressures.

Looking ahead, management reiterated its full-year adjusted EPS guidance, emphasizing confidence in sequential improvement during the second half of the year. CFO Tucker Marshall explained that continued pricing actions in coffee, stabilization efforts in Sweet Baked Snacks, and ongoing momentum in growth brands such as Uncrustables and Meow Mix underpin the outlook. However, he cautioned that persistent tariff headwinds and evolving consumer spending patterns could create variability in quarterly results. Mark Smucker added that the company is closely monitoring potential impacts from weight loss drugs and is prepared to adapt its portfolio as needed.

Key Insights from Management’s Remarks

Management attributed the quarter’s performance to higher coffee costs, the effects of recent tariff increases, and shifting consumer behavior in pet and snack categories.

• Coffee segment pricing actions: Multiple price increases in the coffee segment were implemented to offset higher green coffee costs and new tariffs. Management expects the majority of these pricing actions to be realized in the second and third quarters, with elasticity—how sensitive consumers are to price changes—remaining near historical norms for most actions but worsening with future hikes.
• Tariff impact on margins: The company experienced a significant margin headwind from increased tariffs on imported green coffee. CFO Tucker Marshall noted that these tariffs created a net negative impact, requiring additional price adjustments and affecting profit expectations, especially in the first half of the year.
• Sweet Baked Snacks portfolio rationalization: Smucker continued its SKU rationalization, focusing on eliminating less profitable product lines in Sweet Baked Snacks. While this did not materially impact first-quarter volume, management expects the benefit of this move to improve profitability in later quarters, especially as savings from facility closures take effect.
• Pet segment consumer caution: Management observed reduced frequency of pet treat purchases, as consumers became more selective in discretionary spending. CEO Mark Smucker referenced ongoing advertising and targeted promotions for Milk Bone to offset these trends and maintain brand momentum.
• Limited impact from GLP-1 drugs: Despite attention on weight loss medications that curb appetite, management’s research indicates no meaningful effect on its core categories such as coffee, spreads, and pet food. Mark Smucker stated the company is prepared to adjust product offerings if consumer preferences shift as a result of these drugs.

Drivers of Future Performance

J. M. Smucker’s forward outlook is shaped by continued pricing actions, cost management, and the evolving impact of tariffs and consumer trends.

• Ongoing coffee pricing and elasticity: Management expects further price increases in coffee to offset higher costs from tariffs, but warns that consumer resistance may rise if prices continue to climb. The company projects improved margin contribution from coffee in the back half of the year as price realization catches up to cost pressures.
• Sweet Baked Snacks profitability initiatives: The company is banking on SKU rationalization and bakery closures to drive sequential profitability improvements in Sweet Baked Snacks. Cost savings are expected to begin in the fourth quarter, with additional benefits materializing in the next year as the portfolio is streamlined.
• Monitoring consumer and regulatory shifts: Smucker is closely watching changes in consumer behavior, particularly discretionary spending and the potential impact of weight loss medications. The company is also monitoring for potential tariff relief, which could alter pricing strategies and margin forecasts in future quarters.

Catalysts in Upcoming Quarters

In the coming quarters, the StockStory team will be watching (1) the effectiveness of further coffee pricing actions and the impact on both volumes and margins, (2) the realization of cost savings from SKU rationalization and bakery closures in Sweet Baked Snacks, and (3) any shifts in consumer spending patterns, especially as related to discretionary categories and potential regulatory changes around tariffs. The pace of market recovery in pet and snack brands will also be closely monitored.

J. M. Smucker currently trades at $105.13, down from $110.37 just before the earnings. Is the company at an inflection point that warrants a buy or sell? The answer lies in our full research report (it’s free).

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