The J.M. Smucker Company held a question-and-answer session for their fiscal 2024 second quarter earnings, with Vice President of Investor Relations Aaron Broholm leading the call. The company's CEO and CFO, Mark Smucker and Tucker Marshall, also participated. The call included forward-looking statements and non-GAAP measures, and the company's initial sales growth target for fiscal 2024 was discussed. Analyst Andrew Lazar asked about the company's organic growth and pricing and volume results for the quarter.

Tucker Marshall and Andrew Lazar discuss the expected growth of the company's net sales, which is anticipated to be around 4% after accounting for co-manufacturing volume and a product recall. The company is expecting to see sales of $650 million this fiscal year, but there are several factors that could impact the true annualized sales outlook. These include the time of ownership since the transaction closing, lost sales due to a week of downtime, seasonality, and transitory dynamics related to competition and customer dynamics.

The company is expecting growth and accretion from the bottom line in the coming months due to the restoration of certain products and a commitment to a 4% top line growth for the portfolio. The question about competition from McKee is addressed, with the company acknowledging that they are lapping some of the supply chain issues from the previous year. They are still excited about the acquisition and believe it is a perfect fit for their portfolio and capabilities. The Hostess business brings a leading brand and strong innovation capabilities in the C-store category.

The company is optimistic about the combination of their businesses and expects it to be beneficial in the next fiscal year. They discussed their gross margin for the rest of the year and explained that it will be lower in the third quarter but stronger in the fourth quarter to meet their full year outlook. The profit contribution from Hostess is forecasted to be $120 million, which is lower than previous estimates. The company may have had to lower their sales expectations and may be considering reinvestment to increase sales growth for fiscal year 2025.

Tucker Marshall and Robert Moskow discuss the outlook for segment profit for Sweet Bank Snacks, which is expected to be around $150 million with a $0.05 impact from opening balance sheet items. The company plans to reinvest in the business to support brand growth and development. The team is working on improving execution with a customer and introducing new products to accelerate sales. The consumer environment for snacking remains strong and Hostess has the ability to be agile in terms of innovation and merchandising.

The speaker discusses the capabilities of Dan, the leader of both Hostess and pet businesses, and how they complement Smucker's portfolio. They also mention the impact of purchase accounting on gross margins and clarify that without the supplier termination in coffee, margins would have been higher. They do not provide specific guidance on coffee segment margins for the rest of the year.

In the third quarter, the company's gross margin may be slightly lower due to the comparison with last year's green coffee costs. However, the fourth quarter is expected to be stronger and help finish the fiscal year. The updated guidance range is down by $0.20 at the midpoint, but this includes the dilution from the Hostess acquisition. The company has seen an over delivery in the second quarter due to improved gross profit margins and SG&A favorability. The back half of the year is also expected to see improvement in gross profit margins, resulting in a midpoint of $9.85 in the guidance range. The investments in liquid coffee are expected to benefit the top line, rather than just margin capture, but there is no specific timeline for when this will take effect.

The company has started working on expanding its liquid coffee offerings and has a team dedicated to this area. They have recently launched Dunkin' cold brew items and plan to introduce more Bustelo options later in the year. Although the contribution of liquid coffee may be modest in the near term, the company is committed to this journey and will continue to expand its presence in the grocery space. The company has terminated a supply agreement with a packaging supplier, but this does not affect their relationship with Cureg. The company has had strong performance in the coffee category in recent years, but there has been a leadership transition in this area, although the current leadership team is highly regarded.

The speaker is pleased with the work done by Hostess and welcomes new leaders from the organization. They also highlight the contributions of a previous member and mention the departure of some individuals for larger career opportunities. The EPS accretion for next year is expected to be off of the 2024 base at Hostess, potentially adding incremental positive earnings on top of an adjusted base. The speaker is unsure of the exact meaning and is seeking clarification.

Tucker Marshall and Rob Dickerson discuss the impact of the Hostess acquisition on Smucker's earnings per share (EPS) for the fiscal year. Marshall believes that if the fiscal year's impact of the acquisition is isolated, base Smucker will still see EPS growth. They also anticipate Hostess contributing to the company's overall accretion, thanks to a full year of ownership, business growth, and synergy realization. Mark Smucker mentions that the company will be increasing its marketing spend in the remaining quarters of the year, but promotional activity will remain normal. They are pleased with the performance of their marketing efforts so far.

The speaker discusses the recent launch of Uncrustables advertising during Monday Night Football and its potential to drive awareness and demand for the product. They thank the employees for their hard work and dedication and express excitement for the recent acquisition of Hostess. The call concludes with a message of creating shareholder value and well wishes for the holiday season.

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