CEO & Chairman, J M Smucker Co
SJM Stock | The J M Smucker Company Q4 2026 Earnings Call
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About Mark Smucker
Mark Smucker, CEO and Chair of J.M. Smucker, stated during recent earnings calls that the company's strategy is working and that its portfolio is delivering results. He noted that the company's fiscal 2026 results highlighted the strength of its focused strategy and portfolio optimization efforts, and that the company is pleased with the momentum of its portfolio as it enters fiscal 2027. Smucker said the company's focus is on three strategic priorities: driving focused organic volume growth across key platforms, improving profitability and accelerating earnings growth, and maintaining a disciplined approach to capital deployment. Smucker discussed several business segments, including Uncrustables, which he said hit a billion dollars in sales and is expected to continue growing. He also addressed the Hostess brand, stating the company's focus is on stabilizing that business and improving profitability, noting that donuts grew 13% and represent about 40% of the portfolio. Regarding coffee, Smucker said the company anticipates mid-single-digit percentage deflation largely driven by green coffee, and that the company is taking a measured approach to pricing that supports its financial goals. He also noted that the company plans to pay down over $700 million of debt and over $450 million of dividends, with a goal of reaching a leverage profile of around three times by the end of the fiscal year.
Transcript (62 segments)
✨ AI-enhanced transcript with speaker attribution
O
Operator0:02
Good morning and welcome to the J.M. Smucker Company's fiscal 2026 fourth quarter earnings question and answer session. This conference call is being recorded and all participants are in listen-only mode. Please limit yourselves to two questions and re-queue if you have additional questions. I'll now turn the conference call over to Crystal Briding, Vice President, Investor Relations and Financial Planning and Analysis. Thank you, you may begin.
C
Crystal Briding0:27
Good morning and thank you for joining our fiscal 2026 fourth quarter earnings question and answer session. I hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website at jmsmucker.com. We will also post an audio replay of this call at the conclusion of this morning's Q&A session. During today's call, we may make forward-looking statements that reflect our current expectations of our future plans and performance. These statements rely on assumptions and estimates and actual results may differ materially due to risks and uncertainties. Additionally, we use non-GAAP results to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning's press release. Participating on this call are Mark Smucker, Chief Executive Officer, President and Chair of the Board, and Tucker Marshall, Chief Financial Officer, Executive Vice President, Frozen Handheld and Spreads and Sweet Baked Snacks. We will now open the call for questions. Operator, please queue up the first question.
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Operator1:33
Thank you. The question and answer session will begin at this time. If you're using a speaker phone, please pick up the handset before pressing any numbers. Should you have a question, please press star one on your telephone. If you wish to withdraw your question, please press star two. For operator assistance, please press star zero. As a reminder, please limit yourselves to two questions during the Q&A session. Should you have additional questions, you may re-queue and the company will take questions as time allows. Our first question today is coming from Andrew Lazar from Barclays. Your line is now live.
A
Andrew Lazar2:07
Great. Thanks so much. Good morning, everybody.
M
Mark Smucker2:09
Morning.
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Tucker Marshall2:10
Morning.
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Crystal Briding2:10
Morning.
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Andrew Lazar2:11
Maybe to start, I know one of the biggest points of uncertainty for the group currently is really the macro outlook and what that might mean for costs. Understanding the challenge of needing to guide to a full year in the context of this environment, I'm curious what sort of visibility you have to your low single-digit inflation outlook excluding coffee in terms of hedges and such. Is there a risk that this estimate could ultimately be higher as we move through the year if the macro environment persists, and the offsets that you might have in terms of productivity generation to manage through that?
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Tucker Marshall2:47
Andrew, good morning and thank you. As you've noted within our full year outlook, we do expect mid-single-digit percentage deflation, and that's largely driven by green coffee. But as you've shared, excluding green coffee and tariffs, we do anticipate cost inflation of low single digits across the balance of our portfolio, and that's largely coming through packaging, ingredients, and transportation. We have embedded our best outlook for those increases in our current guidance. And as you know, in any given fiscal year, we'll monitor and address any additional cost inflation either through how we procure the given item or how we think about our hedging strategy, along with ongoing cost and productivity savings, inclusive of taking pricing when and where appropriate. Right now, this really reflects the best estimate, and we look to absorb these changes within our total guidance range. Just acknowledging that the primary driver of this is the geopolitical tensions in the Middle East, and depending upon the duration of those, it does have an implication to the cost outlook and how we manage over time.
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Mark Smucker4:23
Thanks, Andrew. I'll take the second question. This is Mark. I can't help but at least comment first of all that we had a great quarter and a solid outlook for our new fiscal year. Feeling positive about the momentum in our business and overall the portfolio that we have, being both complementary and cohesive. We play in different categories, but they all work together to achieve a great whole. Specific to your question on coffee, it is a great category. We continue to lead the category across segments and the value spectrum with Bustelo being a very significant growth brand now beyond half a billion dollars in sales. Confident in our ability to continue to manage our branded position in coffee as well as our commodity. As we noted, we do expect to see profit improvement in coffee from the moderating commodity. As it relates to how we're thinking about forecasting the business, we really wanted to be prudent in terms of how we're factoring in elasticities. We acknowledge we did have favorable, more favorable than expected elasticities in the inflationary period, but acknowledging that the consumer continues to be cautious, we wanted to be prudent in how we model the deflation. As we are starting to give back some pricing to the consumer in the form of trade, we want to make sure we're thinking about those elasticities and the trends in the category from a prudent perspective. That's really the driver there.
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Andrew Lazar6:31
Right. Very helpful. Thanks so much.
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Operator6:34
Thank you. The next question today is coming from Peter Galbo from Bank of America. Your line is now live.
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Peter Galbo6:40
Hi, good morning. Thank you for the questions. Mark, I was hoping to press a little bit on that last point you made around prudence as it relates to the top line guide for the year. Obviously talking about flat sales in the first quarter and then a deceleration to get to the full year down three to four. Understanding that maybe there's some prudence baked into the coffee side of the equation, maybe you can touch a little bit more on prudence in the other segments, particularly frozen handheld maybe down despite Uncrustables growth potential. If you could provide a little more detail there, please.
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Mark Smucker7:19
Sure. If you think about our frozen handheld and spreads business, it's important to think about that business holistically because we are seeing a little bit of pressure in spreads, but our Uncrustables brand continues to perform very well. If you think about it holistically, it's a peanut butter and jelly story, a sandwich story. Uncrustables hit a billion dollars, so we have tremendous performance. We do expect to continue to see growth in the Uncrustables brand, driven by the breadth of our position in the frozen category, including our offerings, addressing consumer needs through flavors, formats, and different occasions, notably with the higher protein morning offering and now fridge friendly. Our position in Uncrustables continues to give us great confidence that we will continue to see growth. It won't be double-digit growth, but as the leader in the category with the strongest share of voice, we do continue to believe there is runway through distribution, household penetration, innovation, and strategic investments supporting the brand. Great confidence in Uncrustables overall, and the total spreads and handheld category being more about that PB&J total story.
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Peter Galbo9:16
Thanks for that, Mark. And just as a follow-up, Tucker, there's obviously been some trade press around potential further actions on a portfolio review basis as it relates to the Hostess business. Just curious as you all are evaluating potential options, how you're thinking about portfolio construction and potential for further actions across the portfolio. Thanks.
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Mark Smucker9:46
Yeah, Peter, it's Mark. As we think about our portfolio in general, we've been on this journey for quite some time in terms of our portfolio. We always consider the makeup of our portfolio. That's important to us, but what I would focus on right now is as it relates to sweet baked snacks and Hostess, our focus continues to be stabilizing that business and improving profitability. Notably, we have strengthened the portfolio in terms of SKU rationalization. Donuts grew 13% and represents about 40% of the portfolio, so that breakfast occasion for Hostess continues to perform very well. We did complete our manufacturing footprint consolidation, and although we had a fire in the prior quarter, we recovered more quickly than expected. There are definitely some positive indicators, some innovation, notably Suzy Q's among some of our other seasonal and LTO things. We're going to continue to focus on stabilizing the portfolio. It's going to take some time until we actually see top line growth, but stabilizing the business and improving profitability is where we're focused right now.
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Peter Galbo11:20
Okay, thank you.
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Operator11:23
Thank you. Next question today is coming from Tom Palmer from JP Morgan. Your line is now live.
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Tom Palmer11:28
Good morning. Thanks for the question. In the prepared remarks, you gave some specific margin expectations for coffee and sweet baked snacks. I wonder if you might give some added detail for frozen handheld spreads and pet segments. So for pet, do you expect low single-digit top-line growth to translate to profit growth? And for frozen handheld, to what extent might the margin strength of the fourth quarter be sustained into 2027? Thank you.
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Tucker Marshall12:02
Tom, as you think about the construct of our 85 cent EPS growth year-over-year, what you're really seeing is 75 cents coming through our business portfolio, which is driven by segment profit growth from both coffee and Hostess being offset by frozen handheld and pet. The coffee growth year-over-year is largely coming from lapping unmitigated tariffs and the green coffee deflation beginning to materialize. Hostess's growth is largely driven by improved cost outlook inclusive of a list price increase to cover cost inflation. Frozen handheld and spreads will be down year-over-year as volume momentum in Uncrustables is offsetting the spreads portfolio, but also as we continue to make strategic investments across Uncrustables and support marketing of that brand. Within the pet portfolio, we see continued volume momentum across both Meow Mix and Milk-Bone, but we are also making investments in marketing, and the inflation we're experiencing is largely impacting our pet portfolio. Lastly, the away from home business is expected to be roughly flat year over year from a profit standpoint.
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Tom Palmer13:41
Thanks for all that detail. I did have a follow-up on marketing. I think relative to what was laid out in the third quarter, marketing was a lot lower in the fourth quarter. Any color on the decision to pull back in the fourth quarter and how quickly it ramps up to start out the year. Thanks.
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Tucker Marshall14:04
We are committed to supporting the growth of our brands through ongoing marketing, and we've called out that we're about 5.7% of net sales for the upcoming fiscal year, up $30 million year over year, almost half a billion dollars spend. It will be fairly balanced throughout the year but will begin in our first quarter in terms of those investments to support the portfolio. There was nothing abnormal in our fourth quarter, more around timing and focusing on various activities, but we are committed to the portfolio and the spend of those marketing dollars going forward.
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Tom Palmer14:46
Understood. Thank you.
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Operator14:50
Thank you. As a reminder, that's star one to be placed in the question queue. Our next question is coming from Robert Moskow from TD Cowen. Your line is now live.
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Robert Moskow14:59
There's some comments about what the transformation office is up to. They're rather brief. A lot of your peers are doing some accelerated work to reduce overhead costs, and you might have some opportunities that you want to get to. Is there anything that you're looking at to accelerate the efforts of the transformation office, if not in fiscal 27, maybe a year from now?
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Tucker Marshall15:33
Rob, we've remained committed to ongoing and annual cost and productivity initiatives. Each fiscal year, we target a gross cost savings amount that is a couple points of revenue to support either reinvestment in the business, to cover inflation, or to return to shareholders. As we think about the ongoing positive momentum of our transformation efforts under Rob Ferguson's leadership, he's thinking about the next generation, refilling a multi-year pipeline, and focusing on two areas: our make, or he would refer to it as our buy, make, and move environments within our supply chain, and how we think about bringing technology forward to advance our cost picture as a company. Over time, we will be able to share more with you as we think about the next phase of our transformation efforts.
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Robert Moskow16:36
Okay, thank you.
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Operator16:40
Thank you. Next question today is coming from Chris Carey from Wells Fargo Securities. Your line is now live.
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Chris Carey16:46
Hi, thanks so much. I wanted to start with coffee and get a bit more context on the pricing actions. From a timing perspective, at what point are you transitioning from trade spending into list price reductions? And is that pricing strategy happening across the portfolio, or is it primarily focused on the roasted ground piece given the proximity to the actual green coffee commodity?
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Mark Smucker17:19
Chris, thanks. Coffee is a pass-through category. We do pass through up and down costs to our customers and consumers. We do it prudently in a justified manner. When we speak with our retail customers, we have conversations that are fair and justified as we take those actions. As I mentioned, currently focus is a bit more on trade. We can't commit to specific timing, but when we cross key thresholds dictated by the timing of when we take physical inventory of lower cost coffee, that would dictate when we would take a list price decline. We want to make sure we take a measured approach that supports our financial goals for the year and our ability to be fair with customers and consumers and deliver some degree of profit recovery, which you've seen in our guidance.
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Tucker Marshall18:39
Chris, I would also acknowledge from a flow standpoint, if we've called about a down 3% to down 4% of top line net sales in our prepared remarks, we talked about our first quarter being flatish. We'll really begin to experience the deflation associated with green coffee in our second quarter onward, just to give you a sense of the flow through the year from a top line standpoint.
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Chris Carey19:09
Okay, understood. The second question is on sweet baked snacks. The outlook for the year implies something in the 30% growth range from a profit perspective given the margin improvement you're expecting. The visibility of this business has been a bit challenged in recent quarters. Can you give us a sense on your ability to forecast accurately this business, how fiscal Q4 came in relative to your own expectations, and maybe more context on the confidence you have in a strong profit acceleration for the business in fiscal 27. Thanks.
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Mark Smucker19:52
I'll start and maybe pass to Tucker if he has anything to add. We've gotten our arms around this business in terms of visibility. Last year we had some challenges with trade and the timing of that. I think we've done a very nice job, and I give the team and Jud a lot of credit in terms of how we're managing through this, both in the production network, the consistency of how we're producing, and how we are consistently managing our customer and trade relationships.
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Tucker Marshall20:30
Chris, I would acknowledge that your direction of up about 30% year-over-year from a segment profit standpoint is correct. We believe that we continue to work to control costs within our bakery environment. We continue to focus on executing the best level of trade against the brand or the portfolio. We are taking a list price increase across the donuts portfolio in certain select areas. As we think about the objectives for this year, it's stabilize the business and achieve our profit targets, and then over time work to growth across the portfolio. We also acknowledge that we will continue to deal with both headwinds and tailwinds, but we're confident with the visibility we have and that the teams have their arms around what needs to be accomplished.
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Chris Carey21:28
Okay. Thank you.
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Operator21:32
Thank you. Our next question today is coming from Max Gumport from BNP Paribas. Your line is now live.
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Max Gumport21:41
Hey, thanks for the question. First, I wanted to talk about the spreads business. You called out weakness partly due to broader category dynamics and partly due to the decision not to repeat certain promotional activities. I was hoping to get a bit more color on both: what you're seeing in the category and on the decision not to repeat promo activity. We've heard others in the industry talk about consumers waiting to buy on promotion and that leading to poor returns. Are you seeing this dynamic as well? Thanks very much.
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Mark Smucker22:15
Max, our spreads business is obviously a key component of our frozen handheld and spreads. Having chosen not to repeat some of the promotional activity, the behavior of the categories themselves as well as competition within there continues to be mostly rational. We're not seeing unusual activity. In the peanut butter category specifically, we are the leader, and some of the softness you have seen was in part driven by some volatility, weather events, stock up because of storms. We do not believe this is structural in the peanut butter category. We think those are generally one-off events. We will continue to focus on our leadership position in peanut butter by continuing our strong share of voice and brand building efforts. We play across that entire segment, having the leading stabilized peanut butter and four of the five leading brands of natural and organic peanut butter. We just launched Jif Simply product, a limited ingredient stabilized peanut butter, intended to lead where the consumer is moving towards. We feel very good about the portfolio in peanut butter and spreads broadly. Over the coming year plus, we will continue to make strides to improve our fruit spreads business, but I would think about both peanut butter and jam segments as foundational to our total frozen handheld and spreads business.
M
Max Gumport24:32
Great. Really appreciate all that color. Then on Uncrustables and the fridge-friendly format that will be launching very shortly. I'm curious if you've gotten any insights on retailer reception, maybe even pipeline fill, and if you're able to quantify what exactly is embedded in your outlook from this innovation. Also any difference in the margin profile of the fridge friendly versus the core product. Thanks very much.
M
Mark Smucker25:07
First of all, thanks for the question. Great reception on fridge friendly. Both consumers and customers look to be very excited about that. Keep in mind that all Uncrustables will be fridge friendly. We are transitioning every sandwich to that format and the entire portfolio probably in the mid-summer timeframe, so we're very close. Everything you see in the stores should be fridge friendly.
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Tucker Marshall25:40
Mark, as you think about Uncrustables now being a billion-dollar brand, our outlook for that business for FY 27 is mid-single-digit growth, driven by volume mix momentum, partially offset by some strategic investments. As you think about the composition of the portfolio, about 75% of Uncrustables go through traditional US retail sales, and the balance of 25% go through away from home. We'll see a slightly faster growth rate in away from home based on its relative size and incremental opportunities. It continues to be a bright spot for the company and a very positive story, and we see great momentum across the portfolio through innovation, and one example of innovation is the fridge friendly.
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Max Gumport26:43
Thank you.
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Operator26:46
Thank you. Our next question is coming from Megan Clapp from Morgan Stanley. Your line is now live.
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Megan Clapp26:51
Hi, good morning. Thanks so much. Maybe to follow up there, Tucker, on Uncrustables in terms of the strategic investments with price being down slightly. I believe you took a price increase on the brand for the first time in 3 years last year. Can you unpack a bit more about where those investments are focused specifically? Thank you.
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Tucker Marshall27:17
Megan, over time we've talked about the importance of advancing the volume growth momentum of the portfolio both in traditional retail and away from home. We're doing that through base distribution, innovation, and at times through pricing as well. Pricing is not only strategic but also to recover some inflation. As we move forward, the important thing is to acknowledge that we need to continue to make sure we have the right price and promotion, i.e., merchandising. We need to advance marketing behind the brand. We will continue to absorb ongoing manufacturing costs as we bring on additional capacity to support future growth. This fiscal year is really just a demonstration of growing off the billion-dollar mark, where we're seeing nice volume momentum, but we will strategically make the right decisions around pricing to support the brand and its growth and overall momentum in the portfolio.
M
Megan Clapp28:26
Great, that's helpful. And then maybe a follow-up on tariffs. In the prepared remarks or the release, you mentioned that the outlook does not assume any impact from tariff refunds at this point. Could you give any guardrails around the potential opportunity there? Have you applied for refunds? I think it depends on whether you're the direct importer of record. Just help us understand anything in terms of timing or magnitude. And if refunds were to materialize, would you expect that to flow through to the bottom line or would you be more inclined to reinvest? Thank you.
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Tucker Marshall29:04
Megan, big picture, I would acknowledge that we experienced tariffs in FY26 and we continue to experience tariffs at the 10% level in our FY27 outlook. We are pursuing tariff refunds previously paid. But honestly, the scope and realization remains uncertain. We've made the decision not to factor any of these decisions into our outlook. We're continuing to monitor and assess any changes to existing tariffs or new tariffs, and we'll continue to provide updates over time. For us to make any declarations is probably not appropriate as we navigate the overall environment.
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Megan Clapp29:51
Fair enough. Thank you.
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Operator29:53
Thank you. Next question is coming from Scott Barc from Jefferies. Your line is now live.
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Scott Barc29:58
Hey, good morning all. Thanks very much for taking your questions. First thing I wanted to ask about in the quarter, as we think about both the frozen handheld segment and the pet segment profitability, I think they came in materially ahead of what folks were expecting. Wondering if you can help us understand the drivers of that and maybe quantify magnitude of contribution from those drivers.
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Tucker Marshall30:25
We had roughly a 15 cent over-delivery to expectations in our fourth quarter of last fiscal year. We saw some volume benefit, a little bit of improvement in our gross profit margin, and we worked to control our SD&A expenses in the quarter. In the fourth quarter in frozen handheld and spreads, we had nice momentum across our Uncrustables portfolio as we continued to support and advance that brand. Pet came in nicely due to the underlying momentum in Meow Mix, seeing some signs of stability, also acknowledging their ability to control costs in the quarter. Those elements enabled us to finish a strong fiscal year and carry that momentum into our current fiscal year as we announced our guidance today.
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Scott Barc31:25
Okay, appreciate the color there. And then just second one for me. I know you gave some commentary around Q1 expectations as well as expectation for coffee segment top line cadence through the year. As we look through the rest of the business, the other segments, marketing spend, SD&A, how should we be thinking about cadence as we progress through fiscal 27?
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Tucker Marshall31:51
As you think about earnings per share, we talked about a kind of mid-teens Q1. I would acknowledge that our second quarter will be better than mid-teens, third quarter would be low single digits, and fourth quarter would be flat to slightly down. That will change directionally, but hopefully that provides some context. We're certainly happy to follow up with you post call.
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Scott Barc32:34
Okay, appreciate it. We'll pass it on.
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Operator32:38
Thank you. The next question is coming from Rob Dickerson from BTIG. Your line is now live.
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Rob Dickerson32:44
Great. Thanks so much. Just to circle back on coffee one more time. Tucker, given all the comments you've already made, it's a very easy clarification question. I know you said in the prepared remarks that retail coffee will return to the high 20s in fiscal year 2027. But it sounds like the real benefit starts to come through in Q2. So I'm assuming the high 20s is really a Q2 to Q4 event. Is that fair?
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Tucker Marshall33:23
You are correct.
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Rob Dickerson33:25
All right, simple enough. And then just to touch on capital structure, where you stand. Haven't talked about it yet. Did almost 1.2 billion in free cash flow in 2026, which was great, almost company high. Now looking for around a billion in fiscal 2027, inclusive of some inventory benefits especially on coffee. You just paid down 500 million or so in debt in the back half of 2026. As we think about capital needs in 2027 vis-à-vis free cash flow, are we at a point now where you feel pretty good about your leverage? You don't have as much deleverage need. You called out that guidance excludes share repurchase. Just trying to get a view as to where you would like to place any excess capital and how that relates to where the stock price is. Thanks a lot.
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Tucker Marshall34:37
Rob, we remain committed to our financial priorities and policies and to generating a billion dollars or greater in free cash flow in support of our cash deployment model. In fiscal 26, we had 1.2 billion, which enabled us to pay down over 700 million dollars of debt and pay just over 450 million dollars of dividends. As we move forward, we remain committed to free cash flow generation after capital expenditures of roughly flat year over year at 325 million dollars. We want to support the quarterly dividends and grow it where appropriate. We also want to pay down an additional 500 million dollars of debt to support getting down to around a three times leverage profile by the end of this fiscal year. We exited this past fiscal year around 3.8 times. As we begin to achieve our leverage objectives, that opens up additional opportunity for capital deployment where we could contemplate potential share repurchases in the future.
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Operator35:52
Thank you. We reached the end of our question-and-answer session. I'd like to turn the floor back over to Mark for any further closing comments.
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Mark Smucker36:00
Thank you. And thank you all for joining us this morning. As we shared in our prepared remarks, our fiscal year 26 results highlight the strength of our focused strategy and portfolio optimization efforts. Our differentiated portfolio is delivering results. We are pleased with the momentum of our portfolio as we enter fiscal year 27. Our focus is on our three strategic priorities: driving focused organic volume growth across our key platforms, improving profitability and accelerating earnings growth for the company, and maintaining a disciplined approach to capital deployment. Our strategy is working, and the strong foundation we have established gives us confidence in our ability to increase shareholder value and deliver long-term growth for the company. In closing, I would like to thank our employees for their unwavering focus, dedication, and outstanding contributions. Their efforts continue to drive our momentum and position us for future success. Have a great day.
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Operator37:16
Everyone, this concludes our conference call for today. Thank you all for participating and have a nice day. All parties may now disconnect.