The paragraph introduces the J.M. Smucker Company's fiscal 2025 second-quarter earnings Q&A session, which is being recorded and has all participants in listen-only mode. Crystal Biting, Vice President of Investor Relations and Financial Planning and Analysis, welcomes attendees and reminds them to refer to the company's press release and management's remarks on their website for detailed results. The call includes forward-looking statements and non-GAAP results, with Mark Smucker and Tucker Marshall participating. The session is now open for questions, starting with Andrew Lazar from Barclays.

In the conversation, Tucker Marshall discusses expectations for flat year-over-year sales in the fiscal third quarter, despite strong momentum in the first half of the year. The flat projection is attributed to factors such as anticipating flat sales in the coffee segment, a strong comparison in the pet portfolio from the previous year, decreased co-manufacturing sales, and reduced sweet baked snack sales. However, there's expected growth in frozen handheld and spreads portfolios. Additionally, Andrew Lazar inquires about Hostess's new sales guidance, suggesting a low single-digit year-over-year decline in the second half, which marks an improvement from recent mid to high single-digit declines. Tucker confirms Andrew's understanding, implying some drivers for improvement exist.

The paragraph discusses the company's sales outlook for fiscal year 2025, which indicates a slight year-over-year decline in the second half, although some improvement is expected as the year progresses. The improvement is attributed to better execution across the portfolio and easier year-over-year comparisons. During a Q&A session, Ken Goldman from JPMorgan inquires about synergies related to Hostess. Tucker Marshall responds, confirming a commitment to achieving $100 million in cost synergies by the end of fiscal year 2026, split between the current and next fiscal years, even after a divestiture. Mark Smucker adds that the company is optimistic about Hostess despite challenges such as consumer caution due to inflation and some execution issues unrelated to integration.

The paragraph discusses a shift in strategy focusing on four key areas for improvement. These include better execution of fundamentals by increasing display space, expanding distribution, launching a new marketing campaign with a packaging refresh, and exploring innovation. The company plans to introduce one-dollar packs for more value options and enhance co-promotion with legacy brands like coffee, which has shown promising results. These efforts aim to drive better results for the Hostess brand amidst positive snacking trends. The conversation then shifts to the overall company strategy where price versus volume mix is analyzed, projecting a nine percent outlook at the midpoint of their guidance range, with specific impacts from acquisitions, divestitures, foreign exchange, and other factors contributing to base business growth expectations.

In the paragraph, Robert Moskow asks about issues with Hostess's execution and plans for aggressive marketing despite potential challenges from health-focused messaging by the new administration. Mark Smucker responds by acknowledging that the weaker execution was partly due to reduced discretionary income and inflation affecting all channels, especially convenience stores. He mentions plans to improve display efforts and innovation across channels, highlighting opportunities with future co-promoted events. Despite political developments, Smucker is confident that snacking trends remain strong, with consumers consistently snacking a few times a day.

The paragraph discusses the fluctuations in the company's EPS (earnings per share) guidance over the year. Initially, the guidance midpoint was $10, but it was reduced to $9.80 after the first quarter due to a lower revenue outlook and ongoing green coffee inflation, requiring a second round of pricing adjustments. However, the guidance has been revised back up to $9.90 at the midpoint, as the company experienced a gross margin beat in the second quarter, allowing them to improve their full-year outlook.

In the paragraph, Peter Galbo raises concerns about rising coffee prices and asks about the potential need for further price adjustments and their impact on demand elasticity. Mark Smucker responds by acknowledging the significant inflation in coffee prices, noting that Arabica has reached a high not seen in over a decade due to market speculation and the pre-harvest period. Smucker indicates that the company aims to responsibly manage price changes, balancing cost adjustments with consumer affordability, and will use strategies like trade and cost reduction to mitigate price increases. They plan to continue managing their coffee business prudently.

The paragraph discusses the outlook for fiscal year 2026 earnings, considering various factors such as base business momentum, removal of stranded overhead from a pet food business divestiture, synergies from acquiring Hostess, cost and product activity advancements, and debt reduction benefits. Tucker Marshall emphasizes it's too early to finalize the outlook for 2026. Additionally, Chris Carey raises concerns about coffee consumption, questioning the impact of weather-related factors on category volumes and how elasticity and other elements might influence future business outcomes.

In the paragraph, Mark Smucker discusses the coffee business, noting that the majority of consumption occurs at home, with an increase during the holidays. The company remains optimistic about its coffee sector and is adept at adapting its portfolio to suit consumer preferences, such as moving towards liquid forms. When asked about changes in sweet baked snacks, Smucker mentions that positive discussions have occurred with key customers about new packaging, displays, and marketing. The goal is to foster mutual growth in the Hostess brand and the overall snack category through strategic partnerships.

In the paragraph, Tom Palmer and Tucker Marshall discuss the transition services agreement with Post Holdings and its effects on stranded overhead costs in the pet segment. Marshall confirms a $0.60 impact on this fiscal year's earnings due to these costs but indicates efforts to eliminate them in the next fiscal year, which could positively influence year-over-year growth. Alexia Howard from Bernstein then asks about the company's strategy for understanding consumer needs, especially concerning the influence of GLP-1 weight loss drugs. She notes that certain product segments, like peanut butter, pet food, and coffee, align well with this trend, while others, such as Hostess products, might face challenges, as more US adults are using these drugs, a trend that might grow if Medicare and Medicaid begin covering them.

In the paragraph, Mark Smucker discusses the company's focus on various market trends and consumer preferences, specifically mentioning their ongoing research on the impact of GLP-1 trends. He notes that there has been no significant impact on their business, particularly in snacking, due to these trends. Smucker emphasizes the company's long history and ability to adapt to different dietary trends through product innovation. Alexia Howard then asks about the expected earnings impact from the Wortmann divestment, inquiring whether the ten cents hit to earnings is anticipated based on the transaction closing by the end or middle of the third quarter, and how it could affect the next year.

In the given conversation, Tucker Marshall discusses the financial impact of the Wortmann transaction, stating it will impact the full-year earnings by twenty-five cents and the current fiscal year by ten cents. However, the use of $300 million from the transaction to pay down debt will offset this impact, rendering it largely insignificant to the annual guidance. Alexia Howard then thanks Tucker and passes on to the next question. Matt Smith asks Mark Smucker about the drivers of growth for Uncrustables, noting its strong sales momentum. Mark responds enthusiastically, highlighting the opening of a new production site in Alabama, efforts to meet consumer demand, and the launch of new products like Raspberry Uncrustables and a limited peanut butter-only variant.

The paragraph discusses the strong performance and optimistic outlook for the Uncrustables brand, with expectations to reach $900 million in revenue this year, surpassing initial projections. The company is confident about hitting $1 billion by 2026, supported by production, team efforts, and new products. During a Q&A, Rob Dickerson from Jefferies asks about segment-specific profitability, particularly concerning coffee. Tucker Marshall responds, highlighting that the company's overall gross margin exceeded expectations in the second quarter. The strong results have been factored into the earnings guidance, with gross profit margin expected to be between 37.5% and 38% for the year. He notes that some business segments are performing better than anticipated.

The paragraph discusses the shifts in profit margins across different business segments, focusing initially on the coffee portfolio. Coffee margins were strong in the first half of the fiscal year but are expected to decrease in the latter half due to green coffee inflation. Rob Dickerson comments on the dynamics of other segments: pet products margins improved more than anticipated despite overhead challenges, frozen handhelds and spreads are performing steadily, and sweet baked snacks anticipate further investment. Overall, while coffee margins are expected to decline, other segments like pet products are showing better-than-expected performance, and frozen handhelds and spreads remain stable.

The paragraph is from a business discussion focusing on the pet segment's performance, particularly the Milk-Bone brand. Mark Smucker addresses a question posed by Steve Powers from Deutsche Bank about the demand stability in the pet business. Smucker highlights that Milk-Bone continues to perform well due to its extensive range in the value spectrum, offering products from value to premium across various treating occasions, such as dental chews and basic biscuits. Additionally, Smucker attributes the brand's success to the effectiveness of their innovations.

In the paragraph, Mark Smucker discusses the performance and strategies of his company's pet snack brands, highlighting the success of the new peanut buttery bites containing Jif. He notes that Milk-Bone's growth is subdued due to its discretionary category, although it continues to perform. The company is planning to refresh the Pup-Peroni brand to leverage its strong consumer loyalty. He addresses concerns about a slowdown in the pet business, attributing it to tougher comparisons and not to decreased demand. Smucker clarifies that they are no longer co-manufacturing for Host, affecting comparisons, but assures no additional softness in demand for Milk-Bone. Steve Powers acknowledges the explanation, and the conversation moves to a question from Max Gumport.

In the conversation, Tucker Marshall clarifies that the expectation for flat coffee sales pertains to the third quarter, with anticipated growth in the fourth quarter due to recent pricing adjustments. These pricing changes, including a second round in mid-October, will affect demand elasticity in early winter. Regarding pet food, Marshall explains that the Meow Mix brand remains strong, aided by restored promotional activities and innovation, following a return to full supply. The adjustments in pricing and trade spending are responses to competitive dynamics in the market.

In the closing remarks of a teleconference, Mark Smucker expresses gratitude to everyone for joining the call during a holiday week and credits the company's successful quarter to its dedicated employees. He looks forward to the upcoming investor day on December 10th in New York City and encourages any additional requests to be directed to Crystal Biting. He wishes everyone a happy Thanksgiving and holiday week. The operator then concludes the teleconference, thanking participants and inviting them to disconnect.

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