J.M. Smucker (SJM 102.44, -10.49, -9.3%) has fallen to a five-month low after reporting weak Q1 results and cutting its guidance for the fiscal year.
The consumer staples company reported below-consensus EPS of $1.57 while its revenue fell 6.5% yr/yr to $1.78 bln.
Like other established food companies, J.M. Smucker has been challenged by changing consumer preferences. This prompted the company to launch a restructuring program in 2016, which targeted annual cost cuts of about $450 mln by the start of FY20. However, the first quarter of FY20 showed that the company continues to face sluggish demand.
The company's CEO, Mark Smucker, blamed the weak quarter on the timing of shipments, lower pricing of coffee and peanut butter, and competition in the premium dog food segment.
Profit in the U.S. Retail Pet Foods segment grew 19.6% yr/yr to $120.1 mln due to accounting adjustments in the prior year and sales from the Ainsworth acquisition.
Profit in the U.S. Retail Coffee segment fell 12.8% yr/yr to $128.9 mln due to lower volume/mix and lower pricing.
Profit in the U.S. Retail Consumer Foods segment fell 16.8% yr/yr to $81.0 mln due to the impact of a divestiture, lower pricing, and higher expenses related to a construction of a production facility.
Profit in the International and Away from Home segment fell 25.6% yr/yr due to lower pricing and weaker volume/mix.
On the positive side, adjusted gross margin improved 90 bps to 37.70%, but this was entirely due to an improvement in the Retail Pet Foods margin, which rose to 17.9% from 15.0%. U.S. Retail Coffee gross margin weakened to 27.7% from 30.2%, International and Away From Home margin decreased to 13.4% from 16.8%, and U.S. Retail Consumer Foods margin remained at 20.1%.
The weak fiscal Q1 prompted the company to lower its outlook for FY20. The company now expects FY20 EPS between $8.35 and $8.55, down from the previous forecast for EPS between $8.45 and $8.65. Net sales are expected between $7.76 bln and $7.84 bln, which implies a decrease of up to 1% yr/yr while the previous forecast called for sales growth between 1% and 2%.
J.M. Smucker's Q1 report showed that the company continues to face sluggish demand and that its restructuring program has yet to produce meaningful results.