The J.M. Smucker Company (NYSE: SJM) Q4 2025 Earnings Call | 06/10/2025

J.M. Smucker Company Fiscal Q4 2025 Earnings Call Summary

J.M. Smucker Company discussed its fiscal year 2025 fourth-quarter results and provided an outlook for fiscal year 2026. The company acknowledged a challenging environment but expressed confidence in its strategic priorities and key growth platforms.

Key Financial and Outlook Highlights:

• Fiscal Year 2026 EPS Outlook: The company's EPS outlook at the midpoint is $9.00. This figure incorporates several headwinds:
  • Green Coffee Inflation & Elasticity: An 80-cent impact from higher green coffee costs and associated pricing and demand elasticity.
  • Tariffs: A new 25-cent impact from tariffs.
  • Marketing Investment: A 30-cent investment in marketing for key growth platforms like Cafe Bustelo and Uncrustables.
  • Sweet Baked Snacks Softness: A 20-cent impact due to a decline in segment profit from Sweet Baked Snacks.
• Coffee Portfolio: Expects around 20% net pricing for FY26, leading to about a 10% volume impact (an average elasticity of 0.5, consistent with historical levels). The first quarter will see greater elasticity and the most negative cost-price outlook for coffee.
• Sweet Baked Snacks (Hostess):
  • Strategy: Focus on strengthening the portfolio (optimizing core brands like Donets and Cupcakes), elevating execution (dedicated sales force, streamlined operations by closing the Indianapolis facility), and brand building (reigniting growth, investing in brands).
  • Long-Term Growth Algorithm: Revised down from 4% to 3% due to category outlook and stabilization efforts.
  • Cadence: Expects sequential improvement in profitability as stabilization efforts take hold and as the company laps easier comparisons.
• Pricing: The largest driver of the 9% total company pricing relates to green coffee. Other pricing actions, like for Uncrustables, are in the low single digits.
• Tariff Exposure: Primarily in direct materials (green coffee), retaliatory tariffs on products sold in Canada (peanut butter, ice cream toppings, coffee), co-manufactured products (liquid coffee, wet cat food), and capital goods from the EU. The 25-cent net headwind is after pricing decisions and productivity efforts, predominantly impacting coffee.
• SD&A: Higher due to lapping TSA income and incentive program resets, despite some cost and productivity gains. Marketing investment in Cafe Bustelo and Uncrustables is a specific driver.
• Free Cash Flow (FCF):
  • FY25 Miss: Reported $817 million, about $100 million below expectations, primarily due to higher green coffee inflation and increased inventory balances at year-end.
  • FY26 Outlook: $875 million, driven by lower capital expenditures ($325 million, down $75 million) and continued working capital management and earnings.
  • Debt Paydown: FCF, after dividend payments and excess cash from the balance sheet, will be used to fund anticipated debt paydown.
• Innovation: Experienced strong innovation, with $100 million from products launched in the last year, which is on the high side historically. Focus is on innovations related to core products.
• Pet Segment (Meow Mix & Milk Bone):
  • Meow Mix: Supported by increased cat population and strong brand-building efforts.
  • Milk Bone: Projecting a return to growth in FY26, driven by brand building, innovation across segments (value to premium, dental, soft & chewy).
  • Q4 FY25 Softness: Impacted by a $20 million inventory destocking by certain retailers, which was retailer-specific rather than a broader consumer pullback.
• Fiscal Year 2027 (On-Algorithm Growth): The company anticipates FY27 to be an "on-algorithm" growth year for EPS, assuming the current external factors (coffee elasticity, tariffs, sweet baked snacks softness) do not recur.
• Consumer Trends: Acknowledged consumer stress at the lower end of the income spectrum and increasing wariness across the customer base. Snacking remains important, but consumers may seek smaller portion sizes or less sugar.

The company concluded by thanking employees for their dedication and expressed confidence in its strategy, portfolio, and future growth opportunities.