JJSF Q1 Earnings Call: Theater Weakness, Cost Pressures Shape Results, Company Eyes Recovery

Snack food company J&J Snack Foods (NASDAQ:JJSF) fell short of the market’s revenue expectations in Q1 CY2025, with sales falling 1% year on year to $356.1 million. Its non-GAAP profit of $0.35 per share was 48.3% below analysts’ consensus estimates.

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StockStory’s Take

J&J Snack Foods faced notable headwinds in Q1, with management attributing the sales decline primarily to underperformance in the theater channel, ongoing input cost inflation—especially in chocolate—and lost Foodservice volumes from last year's limited-time churro offers. CEO Dan Fachner acknowledged that both the Frozen Beverage and Foodservice segments were impacted, though retail sales offered a partial offset. Management expressed confidence in the company’s brand portfolio and highlighted operational improvements underway to position the business for the upcoming peak season.

Looking ahead, management believes that a rebound in theater attendance, continued innovation, and additional selective price increases will drive improved results in the second half of the year. Fachner expressed optimism about the impact of upcoming movie releases on beverage volumes and cited ongoing efforts to align pricing with rising input costs while protecting volume. CFO Shawn Munsell stated, “We are encouraged that we will deliver a stronger second half, driven by improving theater attendance, the impact of pricing actions and exciting innovation across our portfolio.”

Key Insights from Management’s Remarks

J&J Snack Foods' leadership discussed several factors weighing on the quarter’s results, as well as initiatives designed to address them and restore growth. The most impactful drivers were theater channel performance, Foodservice segment dynamics, and input cost trends.

• Theater channel weakness: Reduced attendance and underperforming movie releases led to lower beverage volumes in the Frozen Beverage segment. Management noted that North American box office sales declined by an estimated 10%, compressing segment margins due to the higher profitability of beverage sales.
• Foodservice volume loss: The Foodservice segment experienced a drop in churro sales following the end of a large limited-time offer (LTO) with a quick-service restaurant partner. While new churro volumes were added, they did not fully offset the prior year’s LTO-driven performance.
• Input cost inflation: The company continued to face increased costs, especially in chocolate for its bakery business. Incremental price increases were implemented, but these were not sufficient to offset inflation entirely in the quarter.
• Retail and innovation momentum: Retail sales grew, particularly in frozen novelties, driven by the DOGSTERS brand and new Dippin’ Dots Sundaes. The company is also testing churro and pretzel innovations, including products aligned with protein and “better-for-you” trends.
• Selective pricing strategy: Management described a careful approach to price increases, emphasizing the need to maintain volume and customer relationships while addressing cost pressures. Further price adjustments are planned for the upcoming quarter.

Drivers of Future Performance

Management outlined a cautiously optimistic outlook for the remainder of the year, emphasizing recovery in theater traffic, pricing actions, and new product momentum as primary themes. Ongoing external risks and consumer sentiment remain important variables.

• Theater traffic rebound: Management expects a stronger summer movie slate to drive increased beverage sales and improve margins in the Frozen Beverage and Dippin’ Dots businesses. Early Q3 data showed positive volume trends following the release of major films.
• Price realization and cost offsets: Additional targeted price increases are planned to help mitigate input cost inflation, especially for chocolate and other key ingredients. The company aims to achieve a balance between recouping costs and retaining customer volume.
• Retail and product innovation: New launches, such as the Dippin’ Dots Sundaes and reformulated SUPERPRETZEL products, are expected to support growth in the retail segment and capture evolving consumer preferences.

Top Analyst Questions

• David Shakno (William Blair): Asked about the portion of gross margin decline not explained in the release; CFO Shawn Munsell attributed most of the gap to chocolate cost inflation relative to pricing offsets.
• Todd Brooks (The Benchmark Company): Inquired whether the plan to restore gross margin to low 30s% assumes future pricing actions; CEO Dan Fachner said the expectation includes both current and future price increases and a positive outlook for theater-driven product volumes.
• Andrew Wolf (C.L. King): Questioned broader Foodservice and convenience channel outlooks; Fachner acknowledged ongoing consumer confidence weakness and softness in convenience stores, but highlighted optimism for the second half as headwinds fade.
• Scott Marks (Jefferies): Asked about pressure in the pretzel category and regulatory changes; Fachner cited category softness but noted growing market share, and highlighted efforts to reformulate products in response to artificial ingredient regulations.
• Todd Brooks (The Benchmark Company): Queried about distribution cost leverage in the second half; Munsell said costs should approach 10% of sales as higher seasonal volumes improve efficiency.

Catalysts in Upcoming Quarters

In the coming quarters, our analysts will focus on (1) whether increased theater attendance actually translates into stronger Frozen Beverage and Foodservice sales, (2) the company’s ability to implement additional price increases without sacrificing volume or customer relationships, and (3) the performance of new retail products, such as Dippin’ Dots Sundaes and reformulated SUPERPRETZEL, during the peak summer season. We will also monitor how effectively J&J Snack Foods addresses ongoing input cost inflation and regulatory changes impacting product formulations.

J&J Snack Foods currently trades at a forward P/E ratio of 22.8×. Should you double down or take your chips? See for yourself in our free research report.

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