SJM Q1 Earnings Call: Guidance Cut as Key Categories Face Cost and Volume Pressures

Packaged foods company J.M Smucker (NYSE:SJM) missed Wall Street’s revenue expectations in Q1 CY2025, with sales falling 2.8% year on year to $2.14 billion. Its non-GAAP profit of $2.31 per share was 2.8% above analysts’ consensus estimates.

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StockStory’s Take

J. M. Smucker’s first quarter was shaped by divergent trends across its core categories. CEO Mark Smucker cited continued strong demand for brands like Uncrustables and Café Bustelo, supported by new product launches and increased marketing, as key contributors to growth in select segments. However, management acknowledged that discretionary spending pressures and retailer inventory adjustments weighed heavily on the Sweet Baked Snacks and Pet Foods businesses. The company also reported that volume declines in dog snacks and fruit spreads offset gains elsewhere, with CFO Tucker Marshall highlighting that cost inflation—especially for green coffee—necessitated further pricing actions. Notably, management was candid about underperformance in the Hostess-branded snacks segment, which prompted a strategy shift and leadership change within that business unit.

Looking ahead, management expects continued headwinds from elevated commodity costs, tariffs, and evolving consumer behaviors. Mark Smucker emphasized the company’s intent to recover rising input costs through additional price increases, especially in coffee, while investing in marketing for key brands such as Café Bustelo and Uncrustables. The outlook for the Sweet Baked Snacks segment remains cautious, with plans to stabilize Hostess brand performance through portfolio simplification and operational changes. “We are being cautious in our fiscal year 2026 guidance,” CFO Tucker Marshall explained, noting that assumptions include demand elasticity, increased marketing spend, and the ongoing impact of tariffs. The company believes its transformation initiatives and cost savings will partly offset these challenges, but acknowledges that the external environment remains dynamic.

Key Insights from Management’s Remarks

Management attributed the quarter’s results to robust innovation in core brands, cost inflation in coffee, and underperformance in Sweet Baked Snacks, leading to a revised segment strategy.

• Uncrustables and Café Bustelo momentum: The Uncrustables brand achieved its eleventh consecutive year of double-digit growth, driven by national advertising, new product launches, and expanded distribution. Café Bustelo also delivered significant sales gains and increased market share, with management citing strong acceptance of new roast profiles and expanded marketing.

• Sweet Baked Snacks reorganization: Hostess and the Sweet Baked Snacks segment underperformed due to soft consumer demand and operational missteps. Management installed a new segment leader, narrowed priorities to three focus areas (portfolio, execution, and growth), and announced the planned closure of the Indianapolis bakery to streamline costs and improve margins.

• Pet Foods mixed results: Milk-Bone saw continued innovation—such as dog treats made with Jif peanut butter—while Meow Mix benefited from modernized packaging and new product launches. However, overall segment sales declined, impacted by retailer inventory reductions and broader consumer caution in discretionary pet spending.

• Coffee price increases and elasticity: Facing record-high green coffee costs, Smucker implemented multiple price hikes in its coffee portfolio. Management reported that initial demand elasticity was better than expected but acknowledged that further price increases could affect volumes.

• Transformation Office and cost savings: The company's Transformation Office delivered above-target synergies from the Hostess acquisition and supported margin expansion in key segments through productivity improvements and portfolio optimization.

Drivers of Future Performance

Management expects near-term performance to be shaped by commodity cost inflation, price elasticity, and the stabilization of underperforming segments.

• Commodity costs and tariffs: Ongoing inflation in green coffee and the impact of U.S. tariffs are expected to weigh on margins, particularly in the coffee segment. The company plans additional price increases to recover these costs, though management acknowledges the risk of volume declines from higher prices.

• Brand investment and marketing: Smucker is increasing marketing investment behind priority brands, especially Café Bustelo and Uncrustables. Management believes these investments will drive household penetration and long-term growth, but near-term profit margins may be pressured as a result.

• Sweet Baked Snacks recovery: The revised strategy for Hostess and Sweet Baked Snacks centers on portfolio simplification, cost reduction, and targeted innovation. Management expects these actions to stabilize the segment over time, but flags ongoing consumer caution and market headwinds as risks to recovery.

Catalysts in Upcoming Quarters

Our analysts will be closely watching (1) whether price increases in coffee and Uncrustables lead to further volume declines or are absorbed by consumers, (2) signs of stabilization and improved execution in the Sweet Baked Snacks segment following strategic changes, and (3) continued momentum and share gains for priority brands like Café Bustelo and Meow Mix. Execution on cost savings and synergy capture from recent acquisitions will also be key to monitoring progress.

J. M. Smucker currently trades at a forward P/E ratio of 9.2×. In the wake of earnings, is it a buy or sell? The answer lies in our full research report (it’s free).

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