J.M. Smucker Sales Fall 2% - Update

Erin McCarthy

     J.M. Smucker Co. said its fiscal first-quarter sales fell 2% as its U.S. retail-coffee business

reported lower revenue resulting from increased promotional activities.

     The company's results fell short of market expectations, and Smucker also issued a less

optimistic sales outlook for the year. The company said it expects sales to increase at a rate

"slightly less" than the 5% growth it forecast earlier this year.

     "There is little doubt that the operating environment is challenging," said Chief Executive

Richard Smucker. "However, our brands are well positioned to perform in this competitive market."

     The company, known for its Smucker's fruit spreads and Jif peanut butter, brings in much of its

revenue from its U.S. coffee business, which includes brands such as Folgers and Dunkin' Donuts.

     The company earlier this year said it raised the prices on most of its coffee products to

reflect higher green-coffee costs, and it expected a rise in U.S. retail-coffee prices to help its

sales this year. On Wednesday, Smucker said it expects the price increase for packaged-coffee

products to be more fully realized in the second quarter.

     Globally, demand for coffee is expected to hit a record this year, according to the U.S.

Department of Agriculture. The International Coffee Organization, an industry group, sees

consumption growing twice as fast in countries that export coffee as in importers, such as the U.S.

and Italy.

     For the quarter ended July 31, Smucker posted earnings of $116 million, or $1.14 a share,

compared with $126.6 million, or $1.19 a share, a year earlier. Excluding special items, per-share

earnings rose to $1.34 from $1.21.

     Sales fell 2% to $1.32 billion, driven by increased promotional activities in its U.S. retail

coffee segment and the company's exit of its private-label hot-beverage business in its

international, food-service, and natural foods segment.

     More promotions in the coffee segment resulted in overall lower pricing, which also weighed on

sales.

     Analysts polled by Thomson Reuters most recently projected earnings of $1.37 a share and

revenue of $1.37 billion.

     Smucker's U.S. coffee business posted a 2% volume increase in the quarter. Sales fell 2%, and

the segment's profit declined 4% as result of lower price realization and sales mix.

     Volume in the U.S. consumer-foods segment, which includes Smucker's fruit spreads and Jif

peanut butter, was flat in the period, and posted a 3% decrease in sales. However, profit for the

segment jumped 19%, driven by overall lower commodity costs.

     Meanwhile, sales in the international, foodservice, and natural foods segment decreased 1% from

lower volume, largely a result of the exited portions of its private-label hot-beverage business.