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Shares of The JM Smucker Co. (NYSE: SJM ) fell 2% on Wednesday. The stock is down 8% year-to-date. The company reported mixed results for the third quarter of 2023 a day ago and updated its outlook for the year. Branded food product manufacturers are focusing on offloading some of their slower growing brands in order to improve their margins.
Portfolio revamp
One of JM Smucker’s top priorities is to transform its portfolio and as part of that effort, the company is shedding brands and businesses that aren’t seeing the growth they expect. Last month, SJM announced the sale of several pet food brands including Rachael Ray, Nutrish, 9Lives, Kibbles n’ Bits, Nature’s Recipe and Gravy trainalong with a private label pet food business.
With this divestment, the company’s Pet Foods business will change to approx. 60% pet snacks and 40% cat food as opposed to the current mix where pet food is the majority and snacks make up one-third of the business. This is expected to increase the profit margins and product mix of the business.
In a quarterly conference call, SJM said that the divesting brand only makes a mid-single digit percentage of profits and plans to invest more in the fast-growing, high-margin dog snack category. In Q3, net sales in the dog snack category grew by 11%, led by Milk-Bone brand.
Other growth platforms the company plans to focus more on include Uncrustables sandwiches, as well as cat food and coffee businesses. In Q3, net sales for Uncrustables an increase of 38%. Cat food experienced 6% growth in sales, led by Meow Mix brand. In coffee, net sales increased by 11% with continued strength in the home coffee portfolio.
Quarterly performance
In Q3 2023, JM Smucker’s net sales rose 8% year over year to $2.21 billion, narrowly missing estimates. Adjusted EPS of $2.21 was down 5% YoY but beat projections.
Outlook
SJM now expects net sales for the full year 2023 to increase by 6% year-on-year versus the previous range for sales growth of 5.5-6.5%. Adjusted EPS is expected to be between $8.55-8.75 versus the previous range of $8.35-8.75.
Click here to read the full transcript of the JM Smucker Q3 2023 earnings conference call
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