Jif peanut butter owner J.M. Smucker cut annual sales and profit forecasts on Wednesday, hurt by cost-conscious consumers switching to lower-priced alternatives amid sticky inflation.
While the company increased prices for certain products, including frozen food, to offset soaring raw material costs, it expects lower annual sales as shoppers defer spending on pricier goods.
The company has seen weaker demand for its discretionary categories, including pet food and sweet baked snacks, as lower-income consumers have been a bit more cautious and selective in their spend, CEO Mark Smucker told Reuters.
Consumers grappling with rising costs of living have chosen cheaper private labels for daily essentials such as condiments and frozen food, which has hurt sales of several brands.
The lower-income consumer is not shopping at the convenience channel, which includes stores like 7-Eleven, hitting the Smucker’s Hostess Twinkies and Donettes sales.
“The whole channel is down, it impacts everything in the store,” Smucker added.
The company’s shares dropped nearly 5% on Wednesday.
Smucker’s lowered its yearly net sales estimates to between 8.5% to 9.5% from initial expectations between 9.5% to 10.5%.
It dropped its yearly adjusted earnings guidance to between $9.60 to $10.00 a share, from between $9.80 to $10.20.
The company reported adjusted earnings per share of $9.94 in the previous fiscal year.
Like other companies in the food sector, Smucker’s has been struggling to hold onto cost-conscious customers stung by high prices at grocery stores.
Its coffee division in particular has been a challenge, since Smucker’s had to raise its prices to handle higher coffee bean costs, CFO Tucker Marshall told Barron’s. The price hike led to softer sales, Marshall said.
Smucker’s reported quarterly earnings per share of $2.44 and revenue of $2.1 billion. Its earnings beat FactSet analysts’ estimates of $2.17 a share.
The company’s net sales grew 18% since the year before, mostly due to its acquisition of Hostess Brands last November.
“Snacking continues to be a compelling occasion throughout a consumer’s day,” Marshall told Barron’s.
He said “70% of consumers have two snacks per day and we decided that we wanted to be in sweet baked goods.”
Smucker’s has pivoted to focus on some of these faster-growing categories, including the snack division. It divested from its Canada condiment business, its mixed nut company and some of its pet food brands.
The company’s comparable sales grew 1% from the same quarter last year excluding acquisitions, divestitures and foreign exchange rates.
Smucker’s success came from a few key brands, including Uncrustables.
Sales of the frozen jelly sandwiches grew by a double-digit percentage since last year.
The company has also seen growth in Milk-Bone, cat food Meow Mix and coffee brand Cafe Bustelo.
These brands will continue to boost Smucker’s growth in 2025, Marshall said.
He said the company expects to see $100 million in cost savings thanks to the lucrative Hostess acquisition from last year.
Smucker’s is on track to hit $1 billion in annual net sales by the end of fiscal year 2026, Marshall said.
