is making moves to boost growth but is being weighed down by weakness in its core brands. It’s hard to see that dynamic changing anytime soon.
The company on Tuesday reported sales and earnings per share for the quarter through July that missed analysts’ estimates. Excluding the recently acquired Ainsworth Pet Nutrition business, organic net sales were down slightly from a year earlier as the coffee, food and pet categories all turned in lackluster performance.
There were pockets of growth, including Dunkin’ Donuts Keurig cups, which Smucker manufactures, the trendy Café Bustelo coffee brand, and Nature’s Recipe pet food. But these were overwhelmed by weakness in older products such as Folgers coffee, Jif peanut butter and the company’s namesake jams.
The company said it now expects organic sales growth of 0% to 1% for the fiscal year ending April 30, compared with an earlier forecast of 2% growth. But thanks to a gain booked on the sale of its baking business, Smucker’s forecast for full-year earnings per share was unchanged.
Divesting the baking line, which makes Pillsbury cake mixes, and acquiring pet snack maker Ainsworth were appropriate moves to adjust Smucker’s portfolio. Ainsworth sales were up 28% from a year earlier in the July quarter, and the company said it expects this growth to be sustained for the full year.
But what Smucker really needs, like fellow struggling food giant Campbell, is a convincing plan to turn around its core brands. With respect to Folgers, Chief Executive
said the company is working on “longer-term initiatives to reinvigorate coffee rituals for this iconic brand.” It was unclear what he meant.
Smucker shares are down around 9% so far this year and trade at an undemanding 13.2 times forward earnings. Despite this, the stock is no bargain. Tinkering around the edges of the company’s portfolio may help a bit, but shares will stay depressed until Smucker fixes its most important brands.
Write to Aaron Back at firstname.lastname@example.org