The J.M. Smucker Company held a Fiscal 2024 First Quarter Earnings Conference Question-and-Answer Session. Aaron Broholm, Vice President of Investor Relations, spoke and encouraged participants to read the press release for full disclosure. Mark Smucker, Chair of the Board, President and Chief Executive Officer, and Tucker Marshall, Chief Financial Officer, were present. Andrew Lazar from Barclays asked a question about the company's expected organic sales growth, which was expected to be 4%, with 3 points of that coming from volume.

Tucker Marshall and Mark Smucker explain that the company is seeing growth in categories such as Uncrustables coffee, Milk-Bone, and Meow Mix, as well as Jif peanut butter and Milk-Bone products that span value to premium. They attribute this success to their focus on the right categories and their investment in brands. Pet sales growth was a bit slower than expected, but the cause of this was not specified.

Tucker Marshall and Andrew Lazar discuss the negative impact of the co-manufacturing agreement on their pet portfolio, which is a $25 million decline from what they expected at the beginning of the year. Peter Galbo then asks for clarification on the reported comparable sales growth number, which is 21%, and Tucker breaks it down, explaining that the growth is due to the 11 points of Jif growth or restoration from the peanut butter recall.

Mark Smucker discussed the reacceleration of Uncrustables growth, which is expected to be around 20% for the full year. This is due to expansion into new channels such as Canada, Away From Home, and increased household penetration. Advertising and other in-store activations are being used to support this growth.

Tucker Marshall reinforced that for the second quarter, J.M. Smucker Co. expects mid-single-digit top line sales and low-single-digit bottom line earnings. They experienced a $0.16 over-delivery in the first quarter, largely due to SD&A expenses that will come back in the second quarter. Other categories such as Uncrustables, coffee, and pet segment will continue to perform. Co-manufacturing sales are expected to be evenly distributed across the second and third quarters, with a slight slowdown in the fourth.

Mark Smucker discussed the pricing and inflation dynamic in the U.S. Consumer Foods business, noting that underlying pricing had lagged inflation but that pricing was now offsetting current inflation. He also mentioned that the company had sharpened its price points on coffee and passed some of that through to customers and consumers, which would help coffee in future quarters. Finally, he noted that there had not been significant deflation across the industry.

Mark Smucker discussed the strategy for coffee pricing in the current year, taking into account the favorability of coffee costs and the outlook for promotions and list price changes. He also mentioned that the company passes along increases and decreases in prices through multiple levers, such as list price, trade, and more surgical pricing. When it comes to the pet segment, Smucker noted that Milk-Bone had a strong quarter due to its range of value from premium to more value-oriented or mainstream products.

Mark Smucker of the J.M. Smucker Company states that the company has seen a shift to more standard Milk-Bone biscuit products and that the original blend of Meow Mix has regained its number one volume position. Smucker also mentions that the company is feeling good about their total pet portfolio and their balance sheet. Smucker confirms that the company is interested in acquisitions, but that the industry as a whole has been quiet on the M&A front.

Tucker Marshall and Jason English from Goldman Sachs discussed the SG&A favorability in the first quarter, which was attributed to some favorability in marketing and operations support lines, as well as corporate functions. They clarified that they are not expecting any further favorability in SG&A despite incremental marketing planned for the next three quarters. They also discussed the weaker than expected coffee prices, which may turn deflationary due to investment this month.

Tucker Marshall explains that the segment profit margin for the year is expected to be in the high-20s due to deflation in green coffee. Additionally, the gross profit margin guidance for the year has been increased to 37% due to cost favorability in areas such as commodities, transportation, manufacturing, and distribution.

Mark Smucker answered a question about the increased value-seeking behavior in the pet industry and believes that pet owners tend to treat their pets better than their children. Steve Powers asked about the raise in outlook and how it affects free cash flow, to which Tucker Marshall responded that there is some incremental cash taxes as the company had a strong finish to the last fiscal year.

Mark Smucker, CEO of the Company, thanked the employees for their hard work and dedication to the Company. He also discussed the demand for Meow Mix exceeding capacity, and the plans to improve capacity for the second quarter. This includes productivity and nominal capital investments to ensure the plants are running as best they can. He expects improvement to continue through the second quarter and there should be no unusual impacts in the back half of the year.

The speaker invites participants to join them at the Barclays conference in Boston next week or to access a live webcast of their presentation on September 5th. The speaker then thanks everyone for their participation and ends the teleconference and webcast.

This summary was generated with AI and may contain some inaccuracies.