ORRVILLE, OHIO — Sales for The J.M. Smucker Company’s US Retail Pet Foods segment grew 13% to $729 million in the first quarter of its fiscal year 2023, representing the three-month period ended July 31. Price increases across the pet portfolio were issued to combat rising input costs.
Segment profit was up 51% to $120.3 million, “primarily reflecting a favorable net impact of higher net price realization and increased commodity ingredient, packaging and manufacturing costs and lower marketing spend,” said Tucker Marshall, chief financial officer, in the company’s prepared earnings call remarks.
The company shared its first quarter fiscal 2023 earnings on Aug. 23, which reflected recent divestitures including the sale of its private label dry pet food business to Diamond Pet Foods, Inc. on Dec. 1, 2021.
The pet business remains the largest category for Smucker’s in terms of net sales, and joins the company’s coffee and snacking businesses as “key enablers for future growth,” according to Mark Smucker, chair of the board, president and chief executive officer.
“While supply chain challenges continue across the industry, our business is benefiting from improved execution and a portfolio of brands that provide great value to consumers,” he added.
Net sales for the company’s cat food portfolio grew 24%, led by Meow Mix. The brand’s dry cat food products gained 2 share points over the quarter and grew dollar share almost four-times above any other dry cat food brand, Smucker noted.
“Our growth was aided by some customers shifting purchases from wet to dry cat food, based on the value proposition,” he said.
The dog snack category also saw double-digit growth at 14%, led by a 27% sales increase of its Milk-Bone brand.
“The Milk-Bone brand continues to drive growth through core offerings and premium-positioned innovation for our market-leading dog snacks business and the category overall,” Smucker said.
In the dog food category, Nutrish and Kibbles ‘n Bits led an 18% growth in net sales over the quarter. Smucker stated the company will “continue efforts to stabilize” its dog food portfolio, despite continued supply chain challenges impacting this category.
Overall, first-quarter net sales for Smucker’s totaled $1.87 billion, up 1% or $15 million from year-ago sales. Operating income declined 31% to $179.7 million due to higher SG&A expenses and a decrease in gross profit.
Net sales growth was offset by the company’s Jif peanut butter recall earlier this year, which resulted in a 9% unfavorable impact, the company reported. Price increases across several categories, including its US Retail Pet Foods business, drove a 14% increase in comparable net sales over the quarter.
"Our first quarter results reflect a strong start to the fiscal year, demonstrating our operational excellence and strength of our strategy,” Smucker said. “Our teams have done outstanding work to manage headwinds from cost inflation, industry-wide supply chain challenges, and the Jif® peanut butter recall.”
Higher input costs for commodities and ingredients, manufacturing and packaging were apparent in the first quarter, partially offset by higher net price realization, according to Smucker’s.
For its full-year guidance, the company expects net sales to grow between 4% and 5%. Adjusted earnings per share (EPS) is projected between $8.20 and $8.60. Smucker’s also expects to spend $550 million in capital expenditures over the fiscal year.
“Due to the better-than-expected first quarter results and sustained momentum for our trusted brands, we are raising our net sales, adjusted earnings per share, and free cash flow expectations for this fiscal year,” Smucker added. “In the months ahead, we will sustain investment in our growth platforms including the Milk-Bone®, Dunkin'®, and Smucker's® Uncrustables® brands. We remain confident in our ability to drive long-term growth and shareholder value creation through the current dynamic operating environment.”
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