ORRVILLE, OHIO — The JM Smucker Company shared its financial results for the third quarter of its 2024 fiscal year ended Jan. 31, detailing a significant decline in sales for its pet food division. However, the company’s Meow Mix and Milk-Bone brands both witnessed double-digit growth in the quarter, reflecting Smucker’s success in reshaping its pet food portfolio.
For its US Retail Pet Foods segment, Q3 2024 net sales fell significantly by 39% to $465.20 million. Comparable net sales, which exclude Smucker’s divestment of certain pet food brands, increased $79.10 million (20%). The company attributed this to increased volume/mix driven by Meow Mix, divestiture-related co-manufacturing sales, and growth at Milk-Bone.
Segment revenue increased $500,000, remaining relatively flat at $109.50 million due to higher net price realization, favorable volume/mix, lower costs from divested brands, and increased distribution costs.
“Our pet segment results this quarter continue to highlight the benefits of focusing on brands and categories where we have a leading market share position and divesting brands where we did not,” said Mark Smucker, chair of the board, president and chief executive officer. “Profit margin improved significantly compared to last year, driven by product mix, and profit dollars remained inline with last year, despite the elimination of half of the foods segment’s net sales. pet.
“We are very pleased with how our refocused portfolio is performing from both a sales growth and margin perspective,” he added.
Milk-Bone experienced double-digit net sales growth of 11%, primarily driven by volume/mix growth. In addition, according to Smucker, the brand continues to outperform the dog snack category, which is growing at more than twice the rate of the category. Milk-Bone has continued to grow its dollar share for the past 10 consecutive quarters, driven by retail, product innovation and brand building investments.
“We continue to be excited about the incremental innovation we’re bringing to the category with Milk-Bone® Peanut Buttery Bites, seasonal and limited-time offers, and continued innovation to come,” said Mark Smucker.
Meow Mix also witnessed double-digit net sales growth, this time at 28%, as well as 17% on a two-year CAGR basis. The company partially attributed this to improvements in supply, with Meow Mix having a record quarter for volume and sales growth. According to Smucker, the brand returned to No. 1 spot in the dry cat food segment, in terms of both dollars and volume.
“We expect this strong brand momentum to continue into the fourth quarter,” said Tucker Marshall, Smucker’s chief financial officer.
In a Q&A call held on Feb. 27, Marshall provided more insight into this growth, adding, “We saw the normalization of our pet supply chain, particularly Meow Mix, and manufacturing support being a contributor in Q3, and we expect to continue in Q4 that pet grows double digits.”
Overall, net sales increased to $2.23 billion, an increase of $12.90 million (1%) from $2.22 billion in Q3 2023. Comparable net sales, which exclude Smucker’s recent divestitures and acquisition of Hostess, were reached $1.93 billion, an increase of $106.50 million ( 6%) from $1.82 billion last year.
Gross profit increased to $823.10 million, an increase of $67.30 million (9%) from $755.80 million in Q3 of 2023. However, operating income was $297.40 million, a decrease of $20.50 million (6%) from $317.90 million in Q3 of 2023. The company attributed the decrease in operating income to a $98.30 million increase in special project costs related to its acquisition and integration of Hostess.
Free cash flow was $249.60 million, a significant decrease from $442.70 million last year.
“… Momentum continued across our portfolio, building on a strong start to our fiscal year,” said Mark Smucker. “We delivered another positive quarter of financial results, including organic sales growth and double-digit revenue growth. Our strong top- and bottom-line increases were led by volume growth, reflecting continued consumer demand for our iconic brands, and our continued focus on efficient execution and disciplined cost management .
“Overall, the strength of our categories and brands supported volume share gains across our portfolio,” he added. “Brands growing or maintaining volume share accounted for 86% of our US Retail sales in the third quarter, up from 34% in the same period last year.
“We also continued to make important progress in reshaping our portfolio during the quarter,” added Mark Smucker. “… These actions support our strategy of focusing our resources toward our fastest growth opportunities and leadership in the attractive categories of coffee, snacks and pet foods. This focus and prioritization of resources positions us to drive continued growth and enhance shareholder value.”
Smucker also updated full-year guidance to fiscal 2024. The company expects net sales to decline 3.6% compared to last year to about $8.22 billion, reflecting its multiple divestitures in several segments including pet food Comparable net sales are expected to increase 8.75%, in line with previous projections of between 8.5% and 9.0%. Additionally, the company expects co-manufacturing sales related to divested pet food brands to contribute approximately $140 million to net sales, a $5 million decrease from previous estimates.
Adjusted earnings per share are expected to come in at $9.45 to $9.65, a slight increase over the mid-point range of the previous expectation of between $9.25 and $9.65. Free cash flow is expected to be around $500 million, a decrease from the previous expectation of $530 million, with capital expenditures of $610.10 million.
“Going forward, we are well positioned to adapt to consumer preferences, execute with excellence, and maintain positive momentum in our business,” said Mark Smucker.
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