J. M. Smucker (NYSE:SJM) reported fiscal 2026 third-quarter results that management said exceeded internal expectations, supported by strong comparable net sales growth and continued demand for key brands, while profitability was pressured by higher costs and a sharp decline in the Sweet Baked Snacks segment.
Quarterly performance and portfolio momentum
CEO Mark Smucker said the company delivered “another quarter of strong top-line growth” and “sequential improvement in adjusted earnings per share,” citing disciplined cost management and the benefits of a “transformed portfolio.” Total company comparable net sales increased 8% in the quarter, and increased 9% when excluding contract manufacturing sales related to divested pet food brands.
Brand highlights: Uncrustables, Café Bustelo, Milk-Bone, and Meow Mix
Smucker said Uncrustables grew net sales 10% at the total company level and that the company expects to achieve its $1 billion annual net sales aspiration for the brand in fiscal 2026. He noted Uncrustables added approximately 3.5 million new households over the past year, with household penetration at 26%.
The company is expanding innovation and distribution for Uncrustables, including “fridge-friendly” sandwiches across all flavors starting this summer, which can be kept fresh in the refrigerator for up to five days. Smucker also pointed to expansion into morning occasions with protein-focused varieties (12 grams of protein), including Up & Apple and Bright-Eyed Berry, which he said have reached $1 million in weekly measured retail dollar sales. In convenience stores, management said measured retail dollar sales have tripled versus the prior year and described Uncrustables as a top 10% fastest-growing brand in dollars and units across all categories in the channel.
For Café Bustelo, management said the brand remains one of the fastest-growing in at-home coffee, gaining both dollar and volume share across the mainstream, pre-pack, one-cup, and instant segments in the latest 13-week period. Smucker reported Café Bustelo net sales increased 46% within the U.S. Retail Coffee portfolio, including a 20% increase in volume mix. The company expects Café Bustelo to surpass $500 million in net sales this fiscal year, an increase of more than $100 million versus the prior year, driven by both volume and pricing.
In pet, Smucker said Milk-Bone net sales increased 3% within the U.S. retail pet portfolio, supported by everyday treating and innovation. He cited Milk-Bone Peanut Buttery Bites—a collaboration with the Jif brand—as the number one dog snacks launch over the past four years, with Peanut Buttery Cups set to launch next month.
Smucker said Meow Mix delivered strong growth with net sales and volume mix increases, outpacing the dry cat food category in sales and driving incremental household growth in the latest 13-week period. He highlighted Meow Mix Gravy Bursts as the number one dry innovation launch in the category in 2025, with new Gravy Bursts Salmon Flavored cat food and Gravy Bursts Chicken Flavored treats now available.
Segment results and operational developments
CFO Tucker Marshall said third-quarter net sales increased 7%, while comparable net sales increased 8%. He attributed the comparable increase to a 10 percentage point benefit from net price realization, “primarily driven by higher net pricing for coffee,” partially offset by a 2 percentage point decline from volume mix.
Marshall said adjusted gross profit declined $28 million, or 3%, reflecting higher costs (including commodities and tariffs) and unfavorable volume mix, partially offset by higher net price realization. The company incurred approximately $79 million of tariff-related expense in the quarter, primarily impacting coffee in U.S. Retail Coffee and International and Away From Home.
Adjusted operating income decreased $32 million, or 7%, driven by the gross profit decline and lapping favorable property taxes, partially offset by lower SD&A expenses. With weighted average shares outstanding of 106.9 million, adjusted earnings per share were $2.38, down 9% year over year.
- U.S. Retail Coffee: Net sales increased 23%, with net price realization contributing 23 percentage points and volume/mix down 1 point (decreases in Dunkin’ and Folgers, partially offset by Café Bustelo). Segment profit decreased 5% due to higher commodity costs and tariffs, unfavorable volume mix, and lapping favorable property taxes, partially offset by higher net price realization.
- U.S. Retail Frozen Handheld and Spreads: Net sales increased 2%. Segment profit increased 4%, supported by higher net price realization and lower pre-production expenses related to the new Uncrustables manufacturing facility, partially offset by higher costs and unfavorable volume mix.
- U.S. Retail Pet Foods: Net sales decreased 1%, driven by volume/mix decline tied to lapping contract manufacturing sales from divested pet food brands and a decrease in dog snacks, partially offset by cat food growth. Segment profit increased 4%, primarily due to lower marketing spend.
- Sweet Baked Snacks: Net sales decreased 19% (or down 11% excluding prior-year non-comparable sales related to divested Voortman and certain value brands). Segment profit fell 78%, reflecting higher costs, unfavorable volume mix, and higher marketing spend.
- International and Away From Home: Net sales increased 12% (including $2 million favorable FX). Segment profit increased 17%. Away From Home net sales increased 15%, driven by coffee and Uncrustables.
Management discussed continued pricing actions in coffee to address commodity costs, including price increases in May and August of the fiscal year, and said elasticity trends have been favorable to expectations. Smucker also noted the company expects it will not fully recover green coffee tariff costs incurred in fiscal 2026, but said recent U.S. trade policy changes exclude tariffs on green coffee and the company will “lap these costs next fiscal year.”
Sweet Baked Snacks remained a key area of concern. Smucker said stabilization is taking longer than expected and cited executional and operational challenges and higher costs. The company said it reduced SKU count by 25% to simplify offerings, closed its Indianapolis manufacturing facility (targeting approximately $10 million in cost savings this fiscal year and $30 million annually), and made a “strategic decision to reduce promotional activity from January to the end of the fiscal year” for the segment, contributing to near-term volume and profitability volatility.
Impairment charges, cash flow, and balance sheet priorities
Marshall detailed significant non-cash impairment charges recorded in GAAP results: a $508 million goodwill impairment for the Sweet Baked Snacks reporting unit and a $454 million impairment related to the Hostess brand indefinite-lived trademark. He said the charges reflect near-term underperformance and revised long-term expectations for net sales and segment profit, including a reduced projected long-term growth rate assumption of 2% for the reporting unit and the decision to begin amortizing the Hostess brand trademark in the fourth quarter.
Free cash flow in the quarter was $487 million, compared with $151 million in the prior year. The company ended the quarter with $53 million in cash and cash equivalents and total net debt of $7.3 billion. Trailing twelve-month adjusted EBITDA was approximately $1.8 billion, implying a leverage ratio of 4.1x. Marshall said the company plans to pay down $500 million of debt annually this fiscal year and next and targets a leverage ratio at or below 3.0x by the end of fiscal 2027.
Updated fiscal 2026 outlook and post-quarter disruption
Marshall said the company updated its fiscal 2026 sales outlook following a fire at its Emporia, Kansas, manufacturing facility, which temporarily disrupted Sweet Baked Snacks production. The company estimates the incident will reduce fourth-quarter net sales by approximately $25 million, which lowered the net sales outlook midpoint versus prior guidance. The company maintained its adjusted EPS and free cash flow guidance.
For fiscal 2026, the company now expects net sales to increase 3.5% to 4% year over year, including headwinds from lapping divested businesses and reduced contract manufacturing. Comparable net sales are expected to increase approximately 5.25% at the midpoint, driven primarily by higher net price realization from coffee pricing actions and volume/mix growth in Café Bustelo, Uncrustables, and the Away From Home business.
The company maintained adjusted EPS guidance of $8.75 to $9.25 (midpoint $9.00) and reiterated free cash flow of approximately $975 million at the midpoint, with expected capital expenditures of $325 million.
Management also noted executive leadership changes aligning business segments under Tucker Marshall and Rob Ferguson, and announced new independent board appointments of Bruce Chung and David Singer following engagement with Elliott Investment Management.
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.
