J.M. Smucker Co., owner of Jif Peanut Butter, on Wednesday cut its full-year sales and profit outlook, hurt by rising inflation as cost-conscious consumers turn to cheaper alternatives.
The company has raised prices on some products, including frozen foods, to offset rising raw material costs, but expects full-year sales to fall as consumers cut back on spending on big-ticket items.
Chief Executive Mark Smucker told Reuters that demand for the company's discretionary categories, such as pet food and sweet baked goods, has weakened as lower-income consumers have become more cautious and selective with their spending.
Consumers struggling with rising living costs are turning to cheaper private labels for everyday items such as condiments and frozen meals, hurting sales of some brands.
Low-income consumers are not shopping at convenience stores like 7-Eleven, hurting sales of Smucker's Hostess Twinkies and Donettes.
“The entire sales channel is down, impacting everything in the stores,” Smucker added.
The company's shares fell about 5% on Wednesday.
Smucker's lowered its full-year net sales growth forecast to 8.5% to 9.5% from an earlier estimate of 9.5% to 10.5%.
The company lowered its full-year adjusted earnings guidance to a range of $9.60 to $10.00 per share from a range of $9.80 to $10.20.
The company reported adjusted earnings per share of $9.94 in the previous fiscal year.
Like others in the food industry, Smucker's has struggled to retain cost-conscious customers who are put off by high grocery store prices.
The coffee division in particular has been struggling as Smucker's has had to raise prices to keep up with the rising cost of coffee beans. CFO Tucker Marshall told Barron's:Marshall said the price hikes have caused sales to drop.
Smucker's reported quarterly earnings per share of $2.44 on sales of $2.1 billion. The company's earnings beat analysts' expectations of $2.17 per share, according to FactSet.
The company's net sales increased 18% year over year, mostly due to its acquisition of Hostess Brands in November.
“Snacking continues to be an attractive opportunity for consumers throughout the day,” Marshall told Barron's.
“Seventy percent of consumers snack twice a day and we wanted to expand into the sweet baked goods category,” he said.
Smucker's has pivoted to focus on faster-growing categories, including the snacks division, and exited its Canadian condiments business, mixed nuts company and some of its pet food brands.
The company's same-store sales increased 1% compared to the same period last year, excluding the impacts of acquisitions, divestitures and foreign exchange rates.
Smucker's success was driven by several key brands, including Uncrustables.
Sales of frozen jelly sandwiches have increased by double digit percentages since last year.
The company is also seeing growth from MilkBone, cat food brand MeowMix and coffee brand Café Bustelo.
Marshall said these brands will continue to drive Smucker's growth through 2025.
He said the company expects to save $100 million in costs from last year's lucrative Hostess acquisition.
Marshall said Smucker's expects to achieve annual net sales of $1 billion by the end of fiscal 2026.
