Food manufacturer J.M. Smucker Co. in recent weeks widened its guidance range, in contrast with other companies that have withdrawn their financial forecasts amid uncertainty caused by the coronavirus pandemic.
Orrville, Ohio-based Smucker—the maker of Jif peanut butter, Smucker's Jam, Folgers coffee and Meow Mix—on June 4 said it expects net sales to decline by 1% to 2% in the financial year that runs through April 2021. Adjusted earnings per share are expected to come in between $7.90 and $8.30 in fiscal 2021. The projected sales drop reflects lower expected revenues in Smucker's food-service and office-coffee businesses, as well as higher-than-usual sales in recent quarter ended April 30, due in part to increased consumer demand, the company said.
Coming up with that guidance despite the uncertainty over the direction of the U.S. economy was tough, said Tucker Marshall, who became Smucker's chief financial officer on May 1, after about eight years with the company. May 1 also marked the beginning of Smucker's new financial year.
The dilemma of whether to provide financial guidance was "the No. 1 thing I wrestled with," Mr. Marshall said. The company decided to do so, but with a broader range of estimates than usual.
"We thought that was important because we were entering into a new fiscal year, and I am very much committed to visibility, transparency and communication," Mr. Marshall said.
Roughly 225 companies in the S&P 500—the index that Smucker is part of—have withdrawn guidance as of June 10, according to data provided by research firm Gartner Inc. Over 90 companies revised their guidance, while 49 left theirs unchanged, Gartner said.
"The majority of consumer companies that we cover have pulled guidance," said Bea Chiem, a director at S&P Global Ratings. "Even the companies that are doing pretty well are doing so because they just don't know," Ms. Chiem said.
Spice maker McCormick & Co. and chocolate company Hershey Co. are among the companies that have pulled their guidance. Kellogg & Co. is among those that still provides forecasts.
Some businesses have resorted to providing more detailed information about the performance of individual divisions and specific product categories to help analysts with their modeling given the withdrawal of guidance, Ms. Chiem said.
For analysts, any guidance is helpful, she said. "If there is no baseline, it is more challenging," she said.
In its most recent earnings release, Smucker cautioned that uncertainty has clouded its projections for fiscal 2021, and that its guidance reflects available information. "We need to give ourselves a little bit of flexibility," CFO Mr. Marshall said.
Whether Smucker's forecast is accurate will depend on the pace and the shape of the economic recovery. Policy makers and company executives increasingly expect a large drop in economic activity followed by a prolonged return—a so-called swoosh-shaped recovery. But economists are considering a wide range of other possibilities , which makes it harder for finance professionals such as Mr. Marshall.
Smucker changed its guidance policy after a string of missed sales targets last year weighed on its share price.
"You need to factor in things that could happen in your guidance range," he said.
Some analysts however think the company's targets for fiscal 2021 are still too high as it faces potential declines in pet food sales and other areas. "Smucker has not been great at forecasting. They tend to be overly optimistic," said Laurent Grandet, a managing director at investment bank Guggenheim Securities LLC.
Mr. Marshall said he received positive feedback from investors for the fact that Smucker decided to provide guidance. Still, as of mid-day trading Friday the company's stock had slid 3.66% since the release of its guidance on June 4.