J.M. Smucker (SJM) Reports Strong Fourth Quarter Earnings
J.M. Smucker (SJM) recently rallied on strong earnings last week. The maker of Smucker's jam, Jif peanut butter and Folgers coffee posted fourth quarter earnings of $1.22 per share, or $130.3 million, up from the $0.93 per share, or $104.1 million, it reported in the prior year quarter. While its earnings handily topped estimates by six cents, Smucker's sales slid 1.2% to $1.34 billion, merely matching the consensus estimate. Daily Chart
Sales volume, however, rose 2% thanks to 6% growth in domestic retail coffee and a 4% gain in domestic retail consumer foods. The company's coffee, peanut butter and fruit jams were the company's most popular brands. However, Smucker lowered the price of its packaged retail coffee, which include Folgers and Dunkin' Donuts, by 6% during the quarter to increase lower-priced sales volume. Dunkin' Donuts was Smucker's leading coffee brand during the quarter, reporting 29% year-on-year sales growth. The company also released new flavors of K-Cups, for use with Green Mountain Coffee's (GMCR
) best-selling Keurig single-serve brewers. In total, the company released 70 new products over the year, which it plans to top in fiscal 2014 with the launch of 100 new items across all food categories. COO Vincent Byrd noted that Smucker's strong revenue growth has been fueled by new product innovation, stating that "products launched during the past three years represented $530 million of fiscal 2013 net sales." Smucker also lowered the price of its peanut butter by 10% and fruit preserves by 11% due to lower commodity costs. The company is also investing heavily in marketing, spending 10% on marketing during the quarter to produce 25 new television commercials, new digital marketing initiatives, and other promotions. Peanut butter and jelly sandwiches, considered the traditional lunch of schoolchildren across the United States, are expected to generate higher demand for Smucker's core products during the back-to-school season. Smucker attributed its strong earnings growth to a jump in gross margins, which rose from 33.2% to 35.8%. This was aided by a 4.7% decline in input costs, thanks to declining commodity costs. CEO Richard Smucker was upbeat regarding the company's earnings report, stating, "Our momentum continued through a strong fourth quarter, as we achieved record sales, earnings, and operating cash flow for the full fiscal year." Smucker's cash flow from operations rose 17% year-on-year to over $850 million for the whole year, while free cash flow surged 40% to $650 million. To put this cash flow to good use, Smucker raised its annual dividend per share by 9% and spent $360 million to repurchase almost 4% of its outstanding shares. Looking forward, Smucker recently finished a $70 million expansion of its coffee-producing facilities in New Orleans, expanded its fruit spread manufacturing operations to a new factory in Orrville, and increased its bread-baking capacity. For the rest of the year, Smucker expects lower costs for coffee, peanuts and sweeteners, but higher costs for milk and flour products. Other News About SJM Peanut Costs to Weigh on Smucker's Margins in First Half
Will peanut costs derail Smucker's growth? Smucker Fourth-Quarter Earnings Rise as Sales Fall
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Published on Jun 13, 2013
By Leo Sun