--Smucker expects to keep steady pricing for rest of calendar
year
--Commodity inflation subsides, visibility good
--Shares up 5% to $83.00 in recent trading
(Adds executives' comments, information from company conference
call)
By Annie Gasparro and Melodie Warner
J.M. Smucker Co. (SJM) said it doesn't expect to raise its
prices again this calendar year, as food inflation moderates and
product-volume growth returned in its fiscal first-quarter.
Smucker's first-quarter earnings edged down 0.5% on
restructuring charges, but better-than-expected sales sent the
company's shares up 5% to $83.00 in recent trading Friday.
The company backed its full-year sales guidance and now expects
earnings to be at the high end of its forecast of $5 to $5.10 a
share.
"While the environment remains challenging, we continue to drive
long-term growth through brand-building, product innovation,
acquisitions and productivity initiatives while maintaining a
healthy balance between volume, market share, and profitability,"
Chief Executive Richard Smucker said.
Known for its namesake jams and jellies, Jif peanut butter and
Pillsbury products, the company gets most of its revenue from U.S.
retail coffee. Smucker has seen its earnings challenged by higher
green-coffee and peanut costs and an increasingly more-promotional
environment.
As a result of inflation, Smucker has implemented many more
price increases than have other packaged food players in recent
quarters, which has made its volumes erratic, as retailers stock up
during one quarter before planned price increases take effect, and
then order less the following quarter.
"We do not foresee the need to adjust pricing in our key
categories as we look out through the end of calendar year," said
President and Chief Operating Officer Vince Byrd during a
conference call to discuss earnings. "Beyond this point, our teams
will continue to reassess the need to adjust price, as we proceed
into the latter part of the fiscal year."
With steady prices in place for at least the next few months,
and coffee inflation subsiding, Smucker should see less of a gap
between the number of products it sells to retailers and how much
consumers purchase.
In the recent quarter, the company's product-volume rose 2%
excluding acquisitions--a strong performance relative to what many
other food companies have been logging of late, with its Jif and
Folgers brands leading the way.
"Moderating food inflation as a result of declining commodity
cost has clearly been a factor in this improvement in the
food-and-beverage volume," Mr. Smucker said during the conference
call. "That being said, the impact of the current U.S. drought will
not be fully understood and realized by the industry for a number
of months. We will be monitoring this area and adjusting as
appropriate."
Smucker's first-quarter U.S. retail coffee sales--which include
such brands as Folgers, Dunkin' Donuts and Millstone--climbed 4.1%,
but profit declined 10% because of the timing of price decreases
and higher green-coffee costs realized.
Sales of U.S. retail consumer foods rose 15%, and profit was up
36%.
However, Bernstein analyst Alexia Howard said consumer takeaway
data show Smucker is losing market share lately, as Kraft Foods
Inc. (KFT) has stepped up promotional spending.
Smucker said it is managing its everyday and promotional prices
to remain competitive going to the busy autumn season.
"The [coffee] category does remain a competitive category, and
the competitors that are out there are good; they are effective,"
said Mark Smucker, president of Smucker's U.S. retail coffee
business during the call. "Having said that, we still feel very
optimistic about our brands, the activities that we've got in
place...and the shipments that we've had in the quarter."
For the quarter ended July 31, Smucker reported a profit of
$110.9 million, down from $111.5 million a year earlier. Per-share
earnings rose to $1 from 98 cents due to fewer shares outstanding
in the most-recent quarter. Excluding special project costs,
earnings rose to $1.17 from $1.12.
Sales were up 15% to $1.37 billion, and volume was up 2%.
Analysts polled by Thomson Reuters most recently forecast
earnings of $1 a share on revenue of $1.3 billion.
Gross margin fell to 34.3% from 36.3%.
The international, food-service and natural-foods segment had a
40% sales increase, and income rose 5.7%.
Write to Annie Gasparro at annie.gasparro@dowjones.com.
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