J. M. Smucker (NYSE:SJM) reported fiscal 2027 first-quarter results that exceeded management’s expectations, as higher coffee pricing, volume growth in key brands and $115 million in tariff refunds supported sales, profit and cash flow. The company raised its full-year outlook for net sales, adjusted earnings per share and free cash flow.
Net sales increased 5% from the prior-year period, including a four-percentage-point contribution from net price realization and a one-percentage-point contribution from volume mix. Chief Executive Officer Mark Smucker said the company’s performance reflected its portfolio, execution against strategic priorities and continued investment in brands and capabilities.
Profit Growth Supported by Tariff Refunds
Adjusted gross profit rose $207 million, or 28%, including $115 million in tariff refunds. Excluding those refunds, adjusted gross profit increased $92 million, or 12%, according to Chief Financial Officer Tucker Marshall. Adjusted gross margin increased 760 basis points, or 240 basis points excluding tariff refunds.
Adjusted operating income increased $170 million, or 46%, while net interest expense declined $18 million, or 18%, primarily because of lower debt balances. First-quarter adjusted earnings per share totaled $3.24, up 71% year over year. The result included an $0.84-per-share benefit from tariff refunds.
Free cash flow was $337 million, compared with negative $95 million a year earlier, reflecting higher cash from operations and lower working-capital funding needs. The company ended the quarter with about $6.7 billion in net debt and a leverage ratio of 2.9 times net debt to trailing 12-month adjusted EBITDA, achieving its target of no more than 3 times ahead of its prior timetable.
Smucker said the company paid down approximately $230 million of debt during the quarter and remains committed to repaying at least $500 million during fiscal 2027. The company also raised its dividend in July for the 25th consecutive fiscal year.
Growth Platforms Drive Volume Gains
Management highlighted volume growth across Uncrustables, Café Bustelo, Meow Mix and Milk-Bone, which it identified as key growth platforms.
- Uncrustables: Total-company net sales rose 12%, driven by a double-digit increase in volume mix. The brand achieved record quarterly volume, net sales and household penetration, which reached 27%. Smucker said it is accelerating plans to bring the second phase of its McCalla, Alabama, facility online near the end of the fiscal year.
- Café Bustelo: Net sales increased 23%, including an 8% contribution from volume mix. Smucker said the brand is now the sixth-largest in the at-home coffee category and is targeting a position among the top four brands.
- Meow Mix: The dry cat food brand delivered 4% net sales growth and volume growth, benefiting from category trends and innovation, including Meow Mix Gravy Bursts.
- Milk-Bone: The brand returned to volume-mix growth. Smucker cited double-digit net sales growth in soft and chewy snacks, including Milk-Bone Peanut Buttery Bites.
In U.S. retail coffee, net sales rose 13%, led by pricing and volume growth at Dunkin’ and Café Bustelo. The company said it began passing lower green coffee costs to consumers through increased trade investment during the quarter and may consider additional pricing actions if deflation persists.
U.S. retail frozen handheld and spreads sales increased 3%, led by Uncrustables, though Jif peanut butter and Smucker’s fruit spreads declined. Pet foods sales rose 1%, with cat-food momentum partly offset by a decline in dog snacks. Pup-Peroni sales increased 5%, while the company said dog-snack sales would have been flat excluding shipment timing related to its Jerky Treats brand.
Sweet Baked Snacks Remain Mixed
Sweet baked snacks net sales declined 7%, primarily because of prior-year SKU rationalization and weaker convenience-channel trends. However, U.S. retail-channel sales increased low single digits, driven by double-digit growth for Hostess Donettes.
Smucker said Donettes benefited from expanded distribution, innovation and improving base-business trends. The company cited recent offerings including Donettes Churro Mini Donuts and a sharing-size format. Larger pack sizes have produced faster purchase cycles than traditional sizes, management said.
Segment profit in sweet baked snacks fell 13% because of higher costs and unfavorable volume mix, partly offset by higher net price realization and lower marketing spending. The company nevertheless maintained its expectation for segment-profit-margin improvement in fiscal 2027.
Outlook Raised for Fiscal 2027
The company now expects fiscal 2027 net sales to decline 1% to 2% from the prior year, an improvement of approximately two percentage points at the midpoint, or roughly $180 million, from its prior outlook. The anticipated year-over-year decline reflects lower coffee pricing as green coffee deflation is passed through to consumers.
Adjusted earnings per share are now projected at $10.50 to $11.00, up $0.75 at the midpoint from prior guidance. The updated forecast includes a favorable net benefit of about $0.60 per share from tariff refunds, after planned investments in selling, distribution and administrative expenses.
Smucker also raised its free-cash-flow outlook by $100 million to approximately $1.1 billion. It expects adjusted gross margin of about 38.75%, including a 130-basis-point benefit from first-quarter tariff refunds, while total marketing spending is projected at 5.7% of net sales.
For the fiscal second quarter, management expects net sales to decline 3% to 4%, with a low-double-digit decline in net price realization as lower green coffee costs are passed through to consumers. Adjusted earnings per share are expected to increase in the low-20% range, supported by higher coffee gross profit and lower interest expense, partly offset by increased expenses.
About J. M. Smucker (NYSE:SJM)
The J. M. Smucker Company is a diversified food and beverage manufacturer and marketer known for a portfolio of well-established consumer brands. The company’s main business activities include the production and distribution of fruit spreads, peanut butter, coffee and coffee filters, as well as pet food and pet snacks. Smucker’s core product lines serve both retail and foodservice customers through grocery chains, mass merchandisers, club stores, convenience outlets and e-commerce channels.
Among its leading brands are Smucker’s® fruit spreads, Jif® peanut butter, Folgers® and Dunkin’® coffees, and Café Bustelo® coffee.
