The J. M. Smucker Company (SJM) Q4 2026 Earnings Report, Transcript and Summary

Good morning, and welcome to the J.M. Smucker Company's Fiscal 26 Fourth Quarter Earnings Question and Answer Session. This conference call is being recorded and all participants are in a listen only mode. I will now turn the conference call over to Crystal Beiting, Vice President, Investor Relations and Financial Planning and Analysis.

Thank you.

You may begin.

Good morning, and thank you for joining our fiscal 26 fourth quarter earnings question and answer session. I hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks. Which are available on our corporate website at j-m-smucker.com. Will also post an audio replay of this call at the conclusion of this morning's Q&A session. During today's call, we may make forward looking statements that reflect our current expectations of future plans and performance. These statements rely on assumptions and estimates and actual results may differ materially due to risks and uncertainties. Additionally, we use non GAAP results to evaluate performance internally. I encourage you to read the full disclosure concerning forward looking statements and details on our non GAAP measures in this morning's press release. Participating on this call are Mark Smucker, Chief Executive Officer, President and Chair of the Board and Tucker H. Marshall, chief financial officer, executive vice president, frozen handheld and spreads and sweet baked snacks. We will now open the call for questions. Operator, please queue up the first question.

Thank you. The question and answer session will begin at this time. As a reminder, please limit yourselves to 2 questions during Q&A session. Should you have additional questions, you may re queue and the company will take questions as time allows. First question today is coming from Andrew Lazar from Barclays. Your line is now live.

Great. Thanks so much. Good morning, everybody. Good morning. Maybe to start, I know 1 of the biggest points of uncertainty for the group currently is really the macro outlook and what that might mean for costs. Understanding the challenge of needing to guide to a full year in the context of this environment. I guess I am curious what sort of visibility you have to your low single digit inflation outlook excluding coffee. Terms of hedges and such? And is there a risk that this estimate could ultimately be higher as it moves through the year, if sort of the macro environment persists? Sort of the offsets that you might have in terms of productivity generation to manage through that?

Andrew, good morning and thank you. As you have noted, within our full year outlook, we do expect mid single digit percentage deflation. And, again, that is largely driven by green coffee. But as you have shared, excluding green coffee and tariffs, we do anticipate cost inflation of low single digits across the balance of our portfolio. And that is largely coming through packaging, ingredients, and transportation And we have embedded our best outlook for those increases in our current guidance. And as you know, in any given fiscal year, we will monitor and address any additional cost inflation either through how we procure a given item or how we think about our hedging strategy along with ongoing cost and productivity savings inclusive of taking pricing when and where appropriate. And so right now, this really reflects the best estimate. And we look to absorb these changes within our total guidance range. And just acknowledging that the primary driver of this is the geopolitical tensions in the Middle East, and depending upon the duration of those, does have an implication to the cost outlook. And how we manage over time. And then in coffee, given the expected mid single digit price decline or price realization year over year for the coming year.

I guess why would not we expect a somewhat greater volume outcome or volume improvement with pricing moving lower? Thanks so much.

Thanks, Andrew. I will take the second question. This is Mark, of course. I cannot help but at least comment first of all, that we had a great quarter. And a solid outlook for our new fiscal year. And so just feeling positive about the momentum in our business, and overall the portfolio that we have being both complementary and cohesive, you know, just because play in different categories, but they all work together to achieve a great whole. And then specific to your question just on coffee, it is a great category. We continue to lead the category across segments and value spectrum. With Bustelo being a very significant growth brand, now beyond half a billion dollars in sales. So just confident in our ability to continue to manage our branded position in coffee as well as our commodity. And as we noted, we do expect to see profit improvement in coffee from the moderating commodity as it relates to how we are thinking about forecasting the business, we really just wanted to be, frankly, prudent in terms of how we are factoring in elasticities, We acknowledge we did have some favorable more favorable than expected elasticities in the inflationary period. But just acknowledging that the consumer continues to be cautious, we wanted to be prudent in how we model the deflation And as we are starting to give back some pricing to the consumer in the form of trade, just making sure that we are thinking about those elasticities and the trends in the category from a prudent perspective. that is really the driver there.

Great. Very helpful. Thanks so much.

Thank you. Next question today is coming from Peter Galbo from Bank of America. Your line is now live.

Hi, good morning. Thank you for the question. Mark, I was hoping to press a little bit on that last point you made around prudence as it relates to the top line guide for the year. Obviously talking about flat sales in the first quarter and then a deceleration, I suppose, to get to the full year down 3% to 4%. So understanding that maybe there is some prudence baked into the coffee side of the equation, you can just touch a little bit more on prudence in the other segments. Particularly I think frozen handheld maybe down despite uncrustables growth potential. Just if you could provide a little more detail there, Sure.

So, if you think about our frozen handheld and spreads business, I think it is important to think about that business holistically. Right, because we are seeing a little bit of pressure in spreads, our Uncrustables brand continues to perform very well. And so it is if you think about that holistically, it is a peanut butter and jelly story. it is a sandwich story. Right? And Uncrustables hit a billion dollars. We have a tremendous performance in Uncrustables. And we do expect to continue to see growth in the Uncrustables brand, and that is going to continue to be driven by the breadth of our position in the frozen category, and that includes our offerings, the fact that we are addressing consumer needs both through flavors, through formats, and also different occasions, notably with the higher protein sort of a morning offering, if you will, and now fridge friendly. So our position in Uncrustables continues to give us great confidence that we will continue to see growth. It will not be double digit growth, but nonetheless, as a leader in the category with the strongest share of voice, we do continue to believe that there is runway both through distribution, household penetration, innovation, and then ultimately strategic investments in supporting the brand through our brand building efforts. So again, great confidence in Uncrustables overall. And then just the total spreads and handheld category being more about that PB&J total story.

Okay. Thanks for that, Mark. And just as a follow-up, Tucker, there is obviously been some trade press around potential further actions on a portfolio review basis. As it relates to the Hostess business. Just curious as you all are evaluating potential options just how you are thinking about portfolio construction and potential for further action? Across the portfolio? Thanks.

Yes, Peter, it is Mark. I will take that as well. As we think about our portfolio in general, we have been on this journey for quite some time in terms of our portfolio. We always consider the makeup of our portfolio And so that is something that is important to us. But what I would focus on right now is as it relates to Sweet Baked Snacks and Hostess, our focus continues to be stabilizing that business, and improving profitability. Notably, we have strengthened the portfolio in terms of SKU rationalization, Obviously, donuts grew 13% and represents about 40% of the portfolio. So that breakfast occasion for Hostess continues to perform very well. I would also highlight that we did complete our manufacturing footprint consolidation And although we did have a fire in the in the, prior quarter, we did recover from that. More quickly than expected. So definitely some positive indicators, some innovation, notably, Suzy Q's among some of our other seasonal and LTOs. We are going to continue to focus on stabilizing the portfolio it is going to take some time and it is going to take a bit of time until we actually see top line growth. But suffice it to say stabilizing the business and improving profit is where we are focused right now. Great. Thank you.

Thank you. Next question today is coming from Tom Palmer from JPMorgan. Your line is now live.

Good morning. Thanks for the question. In the prepared remarks, you gave some specific margin expectations for coffee and Sweet Baked Snacks. I wonder if you might give some added detail for frozen handheld spreads and pet segments. So for pet, do you expect low single digit top line growth to translate to profit growth? And then for frozen handheld, to what extent might the margin strength of the fourth quarter be sustained into 2027? Thank you.

Yeah. Tom, as you think about the construct of our $0.85 EPS growth year over year what you are really seeing is $0.75 coming through our business portfolio which is driven by segment profit growth from both coffee and Hostess, being offset by frozen handheld and pet. And really, when you think through that is, the coffee growth year over year is largely coming through lapping unmitigated tariffs, and then the green coffee deflation that is beginning to materialize through the portfolio, Hostess's growth year over year is largely driven by improved cost outlook inclusive of a list price increase to cover cost inflation, And then frozen handheld and spreads will be down year over year as volume momentum in Uncrustables is offsetting the spreads portfolio. But also as we continue to make strategic investments across Uncrustables and we support marketing of that brand as well. And then within the pet portfolio, we see continued volume momentum across both Meow Mix and Milk Bone. We are also making investments in terms of marketing and the inflation that we are experiencing is largely impacting our pet portfolio. And then lastly, as you just think about the momentum of the portfolio, we do expect the away from home business to roughly be flat year over year from a profit standpoint. Great. Thanks for all that detail.

I did have a follow-up on marketing. I think relative to what was laid out in the third quarter, marketing was a lot lower in the fourth quarter. Just any color on the decision to pull back in the fourth quarter and kind of how quickly it ramps up to start out the year? Thanks.

Yes. So we are committed to supporting the growth of our brands and to develop our brands through ongoing marketing, and we have called out that we are about 5.7% of net sales for the upcoming fiscal year. it is going to look like up $30 million year-over-year, almost a half-a-billion-dollar spend. And it will be fairly balanced throughout the year, but it will begin in our first quarter. In terms of those investments to support the portfolio. And I would just say there was nothing abnormal in our fourth quarter. it is probably more just around timing. And focusing around various activities. But again, we are committed to the portfolio and the spend of those marketing dollars as we move forward. Understood. Thank you.

Thank you. Our next question is coming from Robert Moskow from TD Cowen. Your line is now live.

Hey, there. Thanks. Tucker and Mark. there is some comments about what the transformation office is up to. They are rather brief. And, you know, a lot of your peers are doing some accelerated work to reduce overhead costs and you might have some opportunities that you want to get to there anything that you are looking at to accelerate the efforts of the transformation office if not in fiscal 27, maybe even a year from now?

Yeah. Robert, we remain committed to ongoing and annual cost and productivity initiatives. And I would say that each fiscal year, we target a gross cost savings amount that is a couple points of revenue to support either reinvestment in the business to cover inflation or to ultimately, you know, return to shareholders. As we think about the ongoing positive momentum of our transformation efforts under Robert Ferguson's leadership, he is really thinking about the next generation which is refilling a multiyear pipeline and really begin to focus on 2 areas, I would say, our make or he would refer to it as our buy, make and move environments within our supply chain. And also how we think about bringing technology forward to advance our cost picture as a company. So over time, we will be able to share more with you and others as we think about sort of the next phase of our transformation efforts. Okay.

Thank you.

Thank you. Next question today is coming from Christopher Carey from Wells Fargo Securities. Your line is now live.

Hi, thanks so much. I wanted to start with coffee. And just get a bit more context on the pricing actions. So first is just from a timing perspective. At what point are you transitioning from trade spending into list price reductions? And then is that pricing strategy happening across the portfolio? Or is it primarily focused on the roast and ground piece given the proximity to the actual green coffee commodity?

Christopher, thanks. it is Mark. What we coffee is a pass through category. Right? So we do pass through up and down cost to our customers and our consumers. We always do it prudently. We do it in a justified manner when we speak with our retailers, we certainly are going to have conversations that are, you know, fair and justified as we take those. As I did mention, and you point you know, currently focus a bit more on trade. You know, we cannot commit to specific timing, but what I will tell you is when we do cross key thresholds, are--essentially dictated by us, the timing of when we take physical inventory of lower cost coffee that would dictate when we would actually take a list price decline. But we want to make sure that we, of course, continue to take a measured approach that also supports our financial goals for the year and our ability to both be fair with our customers and consumers and, of course, deliver some degree of profit recovery, which you have seen in our guidance.

Christopher, I would also acknowledge from a flow standpoint if we have called out a down 3% to down 4% of top line net sales. In our prepared remarks, we talked about our first quarter being flattish. We will really begin to experience the deflation associated with green coffee in our second quarter onward just to give you a sense of kind of the flow through the year from a top line standpoint.

Okay. Understood. The second question is on Sweet Baked Snacks. The outlook for the year I think, implies something in the 30% growth range from a profit perspective. Given the margin improvement you are expecting? Thereabouts, anyways? The visibility of this business has been a bit challenged in recent quarters. Can you just give us a sense on your ability to forecast accurately this business? How you feel about that? How did fiscal Q4 come in? Relative to your own expectations and maybe a bit more context on the confidence that you have in a strong profit acceleration for the business in fiscal 27? Thanks.

Yes. I will start and maybe pass it to Tucker if he has anything to add. You know, we have gotten our arms around this business in terms of visibility as you point out. Last year, we did have some challenges with trade and the timing of that. I think we have done a very nice job and I have to give the team and Judd a lot of credit, just in terms of how we are managing through this both in terms of the production network, the consistency of how we are producing the products, as well as how we are consistently managing our customer and trade relationships.

And, Christopher, I would acknowledge that you know, your direction of up about 30% year over year from a segment profit standpoint is correct. You know, we believe that we continue to work to control costs within our bakery environment continue to focus on executing the best level of trade against the brand or the portfolio. We are taking a list price increase across the donuts portfolio in certain select areas. And as we think about the objectives for this year, it is stabilized the business and achieve our profit targets and then over time work to grow across the portfolio. But we also acknowledge that we will continue to deal with both headwinds and tailwinds, but we are confident, as Mark said, with the visibility that we have and the fact that the teams have their arms around, excuse me, what needs to be accomplished.

Okay. Thank you.

Thank you. Our next question today is coming from Max Gumport from BNP Paribas. Your line is now live.

Hey, thanks for the question. First, I just wanted to talk about the spreads business. You called out there was weakness partly due to broader category dynamics and partly due to the decision not to repeat certain promotional activities. I was hoping to get a bit more color on both So 1, what you are seeing in the category, and then 2, on this decision not to repeat promo activity. We have heard others in the industry talk about consumers waiting to buy a promotion and not leading to poor returns. Are you seeing this dynamic as well?

Very much. Max, our spreads business obviously is a key component of our frozen handheld and spreads and what I would tell you is you know, having chosen not to repeat some of the promotional activity the behavior of the categories themselves as well as within them continues to be mostly rational. You know, we are not seeing unusual activity In the peanut butter category, specifically, obviously, we are--we are the leader in both categories. And some of the softness that you have seen in the peanut butter category was in part driven by some volatility. There have been some weather events, some stock up because of storms and so forth. We do not believe that this is structural. In the peanut butter category. We think that those are generally 1 off events and we will continue to focus on our leadership position in the peanut butter category by continuing our strong share of voice and brand building efforts and just reminding the group that we do play across that entire segment. So having the leading stabilized peanut butter and then also 4 of the 5 leading brands of natural organic peanut butter, we are well positioned And then notably, we just launched this just simply product, which is a limited ingredient stabilized peanut butter which again is intended to lead where the consumer, in some cases, is moving towards. So feel very good about the portfolio in peanut butter and spreads broadly. And then over the coming year plus, we will continue to make strides to improve our fruit spreads business as well. But I would think about both of both the peanut butter and jam segments as, foundational to our total frozen handheld and spreads business.

Great. Really appreciate all that color. And then on Uncrustables and the fridge friendly format that we will be launching very shortly. Just curious if 1, if you have gotten any, insights on how on retailer reception and maybe even pipeline fill and then how that is looking? Then also if you are able to quantify what exactly is embedded in your Outlook from this innovation. And as also really and just difference in the margin profile of the fridge friendly versus the core product? Thanks very much.

So first of all, thanks for the question. Great reception on fridge friendly. Right. So both consumers and customers look to be very excited about that. Keep in mind that all Uncrustables will be fridge friendly. So we are transitioning every sandwich to that format and the entire portfolio probably in the mid summer time frame. So we are very close. Everything you see in the stores should be fridge friendly.

Max, as you think about Uncrustables now being a billion dollar brand, total company, our outlook for that business for fiscal 2027 is mid single digit growth, which is really driven by volume/mix momentum, just partially offset by some strategic investments And then as you think about the composition of the portfolio, about 75% of Uncrustables go through traditional U. S. Retail sales and the balance of 25% go through away from home. We will see a slightly faster growth rate in away from home just based on its relative size and incremental opportunities as we have prioritized over the years the growth in U. S. Retail ahead of away from home. But it continues to be a bright spot for the company and a very positive story. And we see great momentum across the portfolio through innovation and 1 example of innovation is the fridge friendly.

Thank you. Our next question is coming from Megan Klatt from Morgan Stanley. Your line is now live.

Hi, good morning. Thanks so much. Maybe to follow-up there. Tucker, just on Uncrustables in terms of the strategic investments with price being down slightly I believe you took a price increase on the brand. I think it was for the first time in 3 years. Last year. So just in the context of that, can you maybe just unpack a bit more about where those investments are focused specifically? Thank you.

And, Megan, over time, we have talked about the importance of advancing the volume growth momentum of the portfolio, both in traditional retail and away from home And we are doing that through base distribution. We are doing that through innovation. And at times, we are also doing that through pricing as well. And pricing is not only strategic, but it is also to recover some inflation as well. And so as we move forward, the important thing for us, and we have talked about this on the last couple of earnings calls, over the last, few fiscal years, is just to acknowledge that we need to continue to make sure that we have the right price and promotion I e merchandising, We need to make sure that we advance marketing behind the brand, and we will continue to absorb ongoing manufacturing costs as we bring on additional capacity to support the future growth. And so this fiscal year is really just a demonstration of now growing off the billion dollar mark where we are seeing nice volume momentum, but we will strategically make the right decisions around pricing to support the brand and its growth and overall momentum in the portfolio.

Great. that is helpful. Then maybe 1 on tariffs. In the prepared remarks or in the release, you mentioned that the outlook does not assume any impact from tariff refunds at this point. Could you just maybe give any guardrails around potential opportunity there? Have you applied for refunds? It depends on whether you are the direct importer of record or not. And just help us understand, you know, anything in terms of timing or magnitude that you could share. And if refunds were to materialize, would you expect that could flow through to the bottom line? Or would you be more inclined to reinvest? Some of that?

Yes, Megan, big picture, I would acknowledge that we experienced tariffs in FY26 and we continue to experience tariffs at the 10% level in our FY 27 outlook. We are pursuing tariff refunds previously paid But, you know, honestly, the scope and realization remains uncertain and we have just made the decision not to factor any of these decisions into our outlook and we are continuing to monitor and assess any changes to existing tariffs or new tariffs. And we will continue to provide updates over time But I think at this point in time for us to make any declarations is probably not appropriate as we navigate the overall environment.

Fair enough. Thank you.

Thank you. Next question is coming from Scott Marks from Jefferies. Your line is now live.

Hey, good morning all. Thanks very much for taking our questions. First thing I wanted to ask about, just in the quarter, as we think about both the frozen handheld segment and the pet segment profitability, I think they came in materially ahead of what folks were expecting. Just wondering if you can help us understand the drivers of that and maybe quantify magnitude of contribution from those drivers?

Yeah. We had roughly a $0.15 sort of over delivery to expectations in our fourth quarter of last fiscal year. I would say we saw some volume benefit We saw a little bit of an improvement in our gross profit margin, and then we worked to control our SD&A expenses in the quarter. What we saw in the fourth quarter on frozen handheld and spreads was just nice momentum across our Uncrustables portfolio. As we continue to support and advance that brand And Pet came in nicely just due to the underlying momentum in Meow Mix. Seeing some signs of stability in snacks but also acknowledging too their ability to control costs in the quarter as well. And I just think those elements enabled us to finish a strong fiscal year and carry that momentum into our current fiscal year as we announced our guidance today.

Okay. Appreciate the color there. And then just second 1 for me. I know you gave some commentary around Q1 expectations. As well as expectations for coffee segment, kind of top line cadence through the year. As we look maybe through the rest of the business, the other segments marketing spend, SD and A, how should we be thinking about cadence as we progress through fiscal 27?

Yeah. So as you think about earnings per share, we talked about a kind of a mid-teens Q1, I would just acknowledge that our second quarter will be better than mid teens. And then our third quarter would be sort of low single digits, and then our fourth quarter would be flat to slightly down. As you think about the flow over the year. Again, that will change directionally because we are not trying to sort of articulate quarterly guidance, but we understand that you kind of have to model sort of the outlook So hopefully, that provides some context, and we are certainly happy to follow-up with you post call here.

Okay. Appreciate it. We will pass it on.

Thank you. Next question is coming from Robert Dickerson from BTIG. Your line is now live.

Great. Thanks so much. Excuse me. Just circle back on coffee, I guess, 1 more time. You know, Tucker, given all the comments you have already made on the call today, a very easy clarification question. I know you had stated in the prepared remarks that retail coffee will return to the high 20s in fiscal year 27. But clearly, it sounds like real benefit starts to come through in Q2. So I am assuming the assumption here is that Q1 is a little bit more muted and then really that benefit in high 20s is really a Q2 to Q4 event? Is that fair?

You are correct. Alright. Simple enough. Alright. And then just I guess just to kind of touch on capital structure, where you stand. Have not talked about it yet on the call. Did almost $1.2 billion of free cash flow in 2026, which was great, company high. Now we are looking for, I guess, around a billion in fiscal 27, inclusive of probably some of the inventory benefits especially on coffee. And you just paid down, I think $500 million or so in debt in the back half of the year in 2026. So kind of like, you know, as we think about any capital real capital needs in 2027, kind of vis-a-vis the free cash flow Like, is this you know, are we at a point now where maybe you feel pretty good about your leverage? You do not have as much of a leverage need. And I know you kind of called out, you know, the guidance excludes any type of share repurchase. So just trying to get a view as to where you would like to place any of the excess capital and kind of how that relates to where the current stock price is? Thanks a lot. Yeah, Robert. You know, we remain committed to our financial priorities and policies and to generating a billion dollars or greater in free cash flow in support of our, you know, cash deployment model. As you noted in fiscal 26, you know, we had $1.2 billion of free cash flow. That benefit enabled us to pay down $100 million of debt and pay just over $450 million of dividends So as we move forward, we remain committed to free cash flow generation after capital expenditures, which are roughly flat year over year, $25 million, We wanna make sure that we support the quarterly dividends and grow it where and when appropriate We also acknowledge too that we wanna pay down an additional $500 million of debt because that will support getting down to around a 3x leverage profile by the end of this fiscal year And as a reminder, we exited this past fiscal year around 3.8 times. As we begin to achieve our leverage objectives, that opens up additional capital or cash deployment. Where we could contemplate potential share repurchases in the future.

Thank you. We have reached the end of our question and answer session. I would like to turn the floor back over to Mark for any further or closing remarks. Captain Mark T. Smucker: Thank you, and thank you all for joining us this morning.

As we shared in our prepared remarks, our fiscal year 2026 results highlight the strength of our focused strategy and portfolio optimization efforts. And our differentiated portfolio is delivering results. We are pleased with the momentum of our portfolio as we enter fiscal year 2027. Our focus is on our 3 strategic priorities of driving focused organic volume growth across our key platforms improving profitability and accelerating earnings growth for the company and maintaining a disciplined approach to capital deployment. Our strategy is working and the strong foundation we have established gives us confidence in our ability to increase shareholder value and deliver long term growth for the company. In closing, I would like to thank our employees for their unwavering focus dedication and outstanding contributions. Their efforts continue to drive our momentum and position us for future success. Have a great day.

Everyone, this concludes our conference call for today. Thank you all for participating and have a nice day. All parties may now disconnect.