Smucker Stock Drops, Coffee Sales Jump 15%

This article first appeared on GuruFocus.

JM Smucker Co. (NYSE:SJM) reported fiscal first-quarter earnings that came in just shy of expectations, sending the stock lower in early trading. Adjusted earnings per share landed at $1.90 versus analysts' consensus of $1.93, as softer sales in coffee, dog snacks, sweet baked goods, and fruit spreads weighed on results. Shares fell 5.6% by mid-morning in New York on Wednesday, though the stock remains up 0.4% year-to-date compared with a 9.9% gain for the S&P 500 Index. Management attributed the earnings miss partly to weaker demand across several consumer categories, despite recent price increases aimed at protecting margins.

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Even so, Smucker raised its full-year sales outlook, projecting growth of up to 5% versus the prior forecast of up to 4%. Coffee remains the key growth driver, with sales up 15% after recent price hikes, but CEO Mark Smucker cautioned that further increases planned for this winter could reduce volumes by a low- to mid-teens percentage. The pricing strategy comes as the company works to offset higher costs stemming from President Donald Trump's trade policy, including a 50% tariff on Brazilian coffee that took effect earlier this month. Brazil supplies about one-third of America's unroasted coffee beans, making Smucker's cost base particularly sensitive to tariff changes and broader trade dynamics.

The November 2023 acquisition of Hostess has added complexity, with sweet baked goods underperforming as consumers pull back on discretionary spending. Still, management guided for free cash flow to rise to $975 million from $875 million, supported in part by benefits from the Trump tax bill. While tariffs and shifting consumer demand remain potential headwinds, Smucker's decision to lift its full-year sales forecast and strengthen cash flow guidance suggests the company could be positioning itself for steadier growth through strategic pricing and portfolio realignment.

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