J.M. Smucker’s performance impacted by divested pet food brands

J.M. Smucker’s global net sales decreased 12% to $1.93 billion (€1.78B) in the second quarter of its 2024 fiscal year (FY), which ended 31 October 2023, primarily due to lost sales from the divestiture pet food businesses.

The food and beverage company’s pet portfolio accounted for $464 million (€429M) in net sales in Q2, a 39% drop from last year. In Q2 of the 2023 FY, the pet business hit $765.2 million (€707.5M).

This year’s amount excludes $377.8 million (€350M) of noncomparable net sales from the 2023 FY related to the recently divested pet food brands. If those were included, the pet portfolio would have grown 20% from 31 August to 31 October 2023.

Following the same trend, the company’s pet segment’s profits dropped by 19% to $97.2 million (€89.8M) during the quarter.

Half-year net sales from the pet portfolio also witnessed a decline from $1.49 billion (€1.37B) last year to $905 million (€836.8M) in 2023.

Profit margins

Despite the numbers, the firm believes profit margins improved over the prior year. “We anticipate margins will further improve over time after we fulfill contract manufacturing requirements and remove stranded overhead costs related to the divestiture,” says CEO Mark Smucker.

Meow Mix cat food and Milk-Bone dog snacks grew 10% and 14%, respectively, during Q2 of the 2024 FY, driven by volume/mix and increased demand. The manufacturer stated that demand continued to exceed their production capacity for dry cat food in the quarter.

The contract manufacturing sales related to the divested pet food brands are expected to contribute approximately $145 million (€134M) in net sales during the 2024 FY. “This is $15 million (13.8M) less than our previous estimate, and $40 million (€37M) dollars less than our original estimate at the beginning of the fiscal year,” highlights CFO Tucker Marshall.