Key Takeaways from JM Smucker’s Impressive 1Q16 Results
(Continued from Prior Part)
First quarter segment results
Effective May 1, 2015, J.M. Smucker (SJM) modified its reportable segments to align with the way its management evaluates performance. The U.S. Retail Consumer Foods reportable segment now includes the Natural Foods business. International and Foodservice is now a combination of all remaining businesses.
U.S. Retail Coffee
The introduction of the Dunkin’ Donuts K-Cup pods during the quarter and the Folgers brand drove the net sales increase of $62.3 million for the U.S. Retail Coffee segment. Segment profit increased $17.5 million, reflecting higher net price realization and the contribution of Dunkin’ Donuts.
U.S. Retail Consumer Foods
Net sales for the U.S. Retail Consumer Foods segment were flat. A lower net price realization, primarily related to a price decline on the Jif brand in November 2014, offset favorable volume and a $6.8 million contribution from the Sahale business.
Segment profit decreased slightly as lower net price realization, higher manufacturing overhead costs, and the impact of favorable volume more than offset overall lower commodity costs. The new Memphis, Tennessee, peanut butter facility handled these charges, which were primarily for peanuts, milk, and oils.
U.S. Retail Pet Foods
The U.S. Retail Pet Foods segment contributed net sales of $549.9 million, representing mid-single-digit percent growth compared to Big Heart’s results for the first quarter of the prior year. Before the acquisition, Big Heart reported its first quarter results for fiscal 2015.
Profit also increased compared to Big Heart’s previously reported results, driven by a favorable volume along with lower marketing and commodity costs. This more than offset lower net price realization, reflecting additional promotional activities and higher amortization expense related to the acquisition.
International and Foodservice
Net sales for International and Foodservice increased $16.2 million, including an $11.4 million contribution from Big Heart and $0.9 million from Sahale.
Segment profit was flat, as higher costs in Canada balanced the increase in Foodservice profit and the addition of Big Heart. These higher costs were due to sourcing certain products from the United States. It also reflected the impact of a weaker Canadian dollar compared to a year ago and higher green coffee costs.
J.M. Smucker’s (SJM) main competitors, Campbell Soup (CPB), Bungee (BG), and Flowers Foods (FLO), recorded net margins of 9.58%, 0.80%, and 5.82%, respectively, in their last reported quarters. The Consumer Staples Select Sector SPDR ETF (XLP) invests 0.59% of its portfolio in CPB.
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