Q2 2025 J M Smucker Co Earnings Call - Q&A
[music].
Good morning, and welcome to the J M Smucker company's fiscal 'twenty 'twenty five second quarter earnings question and answer session.
This conference call is being recorded and all participants are in a listen only mode.
Speaker Change: Please limit yourselves to two questions and re queue. If you have additional questions I'll now turn the call over to Crystal biting Vice President Investor Relations and financial planning and analysis. Thank you you may begin.
Speaker Change: Good morning, and thank you for joining our fiscal 2025 second quarter earnings question and answer session. I Hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website, a J M Smucker dot com.
Also post an audio replay of this call at the conclusion of this morning's Q&A session.
Speaker Change: During today's call we may make forward looking statements that reflect our current expectations about future plans and performance.
Speaker Change: These statements rely on assumptions and estimates and actual results may differ materially due to risks and uncertainties.
Speaker Change: Additionally, we use non-GAAP results to evaluate performance internally.
Speaker Change: Courage you to read the full disclosure concerning forward looking statements and details on our non-GAAP measures in this morning's press release.
Speaker Change: Participating on this call are Mark Smucker Chair of the Board, President and Chief Executive Officer, and Tucker Marshall Chief Financial Officer.
Speaker Change: We will now open the call for questions operator, please queue up the first question.
Thank you the question and answer session will begin at this time.
Speaker Change: We are using a speakerphone please pick up the handset before pressing any numbers should you have a question. Please press star one on your telephone.
Speaker Change: If you wish to withdraw your question. Please press star two.
Speaker Change: For operator assistance, Please press star zero.
Speaker Change: As a reminder, please limit yourselves to two questions. During the Q&A session should you have additional questions. You may re queue. The company will take questions. As time allows please standby for the first question. Our first question is coming from Andrew resolved from Barclays. Your line is now live great.
Andrew: Great. Thanks, so much for the question good morning.
Andrew: You now expect flat.
Speaker Change: Flat year over year sales in your fiscal third quarter, even though the top line momentum has been solid thus far this year and certainly well above that.
Speaker Change: Timing of the SG&A spend moving I guess to the third quarter I would think would only help the topline. So is there something discrete you see impacting third quarter sales, maybe it's just hostess moving into the base or what's driving sort of unexpected deceleration.
Speaker Change: Yeah, Andrew Good morning, this is Tucker.
Speaker Change: Thanks for the acknowledgement on delivering a strong second quarter and we do see that.
Speaker Change: And then engineering through the back half of our fiscal year, specifically to your question around flat year over year top line for our third quarter really what were assessing is the second round of pricing within our coffee portfolio. So were anticipating flat coffee sales.
Speaker Change: Seeing the pet portfolio lapping a very strong comp in the prior year.
Speaker Change: Along with assessing the discretionary nature of overall pet treating and also reduced co manufacturing sales.
Further we have called out sweet baked snacks that we acknowledged in our prepared remarks, and then we're seeing that being offset.
Speaker Change: Offset by growth in our frozen handheld and spreads portfolio, which is really the focus of the outlook for for Q3.
Speaker Change: Great No that's really helpful. Thank you for that.
Speaker Change: Best we can tell your new hostess sales guidance.
Speaker Change: For the full year implies I think a low single digit year over year decline in the second half I guess first do I have that right and if so obviously it is more realistic but it still implies a sequential improvement from the call. It mid to high single digit declines we've seen for the brand more recently, so I guess, what what's expected to drive as Adam.
Adam: That sequential improvement in the second half and sort of whats your visibility to that sort of outcome again, if I have if I have the calculation right for the back half. Thanks, so much.
Andrew you are correct.
Speaker Change: The sales guidance for FY 'twenty five implies a low single digit year over year over year decline in our second half.
Speaker Change: We are seeing some sequential improvement as we move through the fiscal year that is really due to two reasons.
Speaker Change: <unk> are the outlines remarks around what we're doing to improve execution across the portfolio came through Mark's section and then secondly is just lapping some easier year over year comp comparable.
Speaker Change: Great. Thank you so much appreciate it for you in December.
Speaker Change: Thank you next question is coming from Ken Goldman from Jpmorgan. Your line is that right.
Ken Goldman: Hi, good morning, and thank you.
Ken Goldman: I'm just wondering to continue the conversation on hostess.
Ken Goldman: Can you update us a little bit on what you're thinking in terms of synergies both this year and next.
Ken Goldman: Maybe a little bit of a longer path to kind of get back to that 4% topline growth longer term.
Ken Goldman: And this is Tucker I'm going to frame and the cost synergies and then have mark talk a bit about how we're thinking the revenue synergy component but.
Speaker Change: But on the cost synergy front, we're still committed to a $100 million of achievement by the end of our fiscal year 'twenty six we're seeing that balanced about half in this fiscal year and half in next fiscal year, and we should be able to achieve that $100 million outlook, even after completing the <unk> divestiture.
Ken It's Marc just maybe to play back a little bit in my prepared remarks. So we still feel really excited about hostess. They loved the brand we think theres a lot of opportunity for it and just wanted to acknowledge in the prepared remarks that there were just two things that were driving the underperformance one was that.
Speaker Change: Just a continued cautiousness of the consumer right in terms of inflation.
Speaker Change: Inflation and lower discretionary income and then a bit of execution.
Speaker Change: Which was not related to the integration because the integration went well, it's behind us and it's complete but.
Speaker Change: What what we really have started to pivot to do is making sure that we're doing four key things, it's executed better against base fundamentals, which is getting more display because it is an impulse category expanding distribution at shelf and notably in the away from home channel.
Speaker Change: We are going to be launching a fantastic new marketing and advertising campaign and the new year, which we believe will be very relevant to consumers and really speak to.
Speaker Change: The emotional connection to the brand.
Speaker Change:
Speaker Change: And then that would include a packaging rate flat rash. Some innovation, we will be looking at launching like $1 path. So we will bringing different value equations to the consumer and then lastly, we had some early tests on co promoting hostess with them.
Speaker Change: Our legacy brands think coffee.
Speaker Change: <unk> and <unk>.
Less less discretionary brands and early reads on those co promotions are very strong so accelerating those efforts. If there's another thing that we'll be doing so over the coming quarters, we would expect to see improvement in the hostess results and just remain confident in that.
Speaker Change: Brand because of overall snacking trends continued to remain positive across multiple categories.
Speaker Change: Great. Thank you for that and then just quickly pivot.
Speaker Change: Pivot to the broader company.
Speaker Change: How would you like us to think about the balance between price versus volume mix.
For the rest of the year.
Speaker Change: Understanding there's a lot of puts and takes in there just a general sense it would be helpful.
Speaker Change: Yeah as we as we think about the full year of Canada, I think it's easier to kind of break it down this way.
Speaker Change: Hum.
Speaker Change: If you think about our outlook at the midpoint of our guidance range at <unk>, 9%.
Speaker Change: When you isolate the impacts of acquisition divestiture foreign exchange comparable growth is probably around.
Speaker Change: Wanted to have.
Speaker Change: When you think of the pet co manufacturing that gives you about another point so base business is about two and a half to three and within that you are probably equally split between volume mix and price on a full year basis.
Speaker Change: Perfect. Thanks, so much.
Speaker Change: Thank you. Your next question is coming from Robert Moscow from TD Cowen. Your line is now live.
Robert Moscow: Hi, Thanks, I had a couple of questions about hostess.
Robert Moscow: One is mark you mentioned that execution weekend can you give us a little more detail details on on what aspect of that.
Robert Moscow: The weekend and what caused it and how you can fix it and then secondly, a broader question I appreciate the plans to market hostess more aggressively in first quarter 'twenty five but are there any concerns internally about whether it might get drowned out a theres a lot of messaging from the new administration.
Robert Moscow: Asian on make America healthy again.
Speaker Change: I'm just wondering is this the right time to be aggressively marketing indulgent snacks and how do you think the consumer will receive it.
Mark Smucker: Sure Rob it's Mark.
Mark Smucker: First of all just on the category in general remember that.
Mark Smucker: When I talked about this less discretionary income and inflation that has affected all channels. So that that is it's traditional channels. It is convenience we've seen the entire convenience channel be down a bit and so that has clearly impacted and then.
Mark Smucker: I guess, what I would highlight is we would've liked to have seen our our execution drive a bit more display and so when I mentioned that we are going to really be ramping up our efforts.
Mark Smucker: Cross channels to make sure that our display in place is relevant.
Mark Smucker: We're supporting that with innovation and again, we do think Theres some opportunity with these these co promoted events that will take place.
Mark Smucker: In the future and and continually off and on.
Mark Smucker: Throughout the next obviously several quarters.
As it relates to anything in the in the.
Mark Smucker: You know the political domain, we believe very strongly that snacking continues the trends are supportive consumers continue to eat a couple snacks a day.
Mark Smucker: That that continues to be the case and indulgent snacking, whether it's hostess or snacking more like in Crespo is that contains protein those will continue and consumers are going to continue to look for a way to reward themselves in different times throughout the day. So.
Mark Smucker: Continuing to connect the dots between the brands and the consumers and what they're seeking whether that be portion size for you know less indulgent more indulgent, we have an obligation to continue to grow the brand and that's what we're going to continue to focus on.
Speaker Change: Great. Thank you.
Speaker Change: Yeah.
Speaker Change: Yeah.
Speaker Change: Thank you next question is coming from Peter Galbo from Bank of America. Your line, there's not a lot.
Speaker Change: Hey, guys. Good morning, Thanks for taking the question good morning.
Speaker Change: Tucker maybe just to start if we look at the EPS guidance going back declined at the start of the year. Your midpoint is now moved I think from from $10 to 980 is now back to 90 90.
Speaker Change: And I just want to understand like the the volatility and what you've seen from a from a cut and then a reed maybe you can just unpack that a bit more for us because it was a bit a bit odd to me I don't know if the visibility is maybe lower than it would have been historically, but.
Speaker Change: Any help in unpacking kind of why the shift has been as much as it has.
Speaker Change: Yeah. So you are correct me, we came into the year with a midpoint of guidance of $10 and we revised down to $9 80 sense coming out of the first quarter at the midpoint.
Speaker Change: That change was largely driven by a reduction in our top line outlook and also driven by ongoing green coffee inflation and the need to take a second round of pricing.
Speaker Change: We took up our outlook for this quarter up 10 cents. So now at the midpoint of our guidance range $9.90 really what we're doing is we're locking in that component of the gross margin beat in our second quarter.
Speaker Change: And so that in our mind, it's a good story and acknowledging our ability to bring up our outlook at the bottom line for the full year.
Got it okay. That's it.
Speaker Change: It's helpful and maybe while we're on the subject of coffee you know mark coffee prices seem to kind of make new highs every day at least in the commodity markets.
Speaker Change: You've taken two rounds of pricing at this point, just how youre thinking about you know.
Speaker Change: Potential the need to take additional pricing and maybe the elasticity impact that that could happen as well thanks very much.
Mark Smucker: Sure Peter Mark here.
Speaker Change: So coffee as we all know it's a pass through category, we've been very pleased with our performance in the quarter.
Speaker Change: Despite the fact that we continue to see significant inflation I would highlight that you know erratic and hit $3 yesterday, and we haven't seen $3 rebate for probably.
Speaker Change: Over over 10 years and so it's it is unusual I would highlight that that the market for a coffee today is very speculative because we haven't hit harvest season, yet and.
Speaker Change: So a lot of the volatility we're seeing is it's really related to financial speculation as we get into the harvest. We will have more Intel in terms of what that looks like we would hope that we would get a bit of relief, assuming we have a good crop.
Speaker Change: There are some indicators that we might but it's still a bit early to start to to anticipate what could be but at the end of the day, we have to be responsible we want to make sure that we are able to pass along cost changes both up and down.
Speaker Change: And we do intend to do that.
Speaker Change: And we will continue to pull the levers available to us whether that's you know a trade or obviously cost reductions and try to make sure that we don't take price up too much in.
Speaker Change: Very carefully to what the consumers can bear, but we will be responsible and we will continue to manage the coffee business. The way we always have.
Speaker Change: Thank you. Your next question is coming from Chris Carey from Wells Fargo. Your line is now live.
Chris Carey: Hi, Good morning, everyone I wanted to follow up on.
Chris Carey: Your line of questioning around coffee, but maybe moving it even a little bit forward Mark Tucker you've made some comments about fiscal 'twenty six EPS being above algorithm.
Chris Carey: And as as we assess our hostess trends clearly an expectation for it to get better against easier comps specifically, perhaps into next summer at C stores.
Speaker Change: But you also have this coffee inflation dynamic as well, but it sounds like you would you would want to price against that going into next fiscal year. How does this all I guess come together in the context of you know.
Speaker Change: Earnings aspirations that you have beyond this fiscal year.
Chris Carey: Chris Good morning.
Chris Carey: It's probably early to talk about the outlook for fiscal year 'twenty six but I can certainly appreciate the question.
Chris Carey: I think what I'd like to frame in is sort of the components that were considering against that outlook for 2006 first of all what is base business momentum and you'd sort of alluded to some of that in your in your questions too is the removal and mitigation of stranded overhead associated with the pet food divestiture.
Chris Carey: This is the realization of synergies from the the hostess acquisition also as we think about ongoing advancements from our cost and productivity programs associated with our transformation office and then thinking about the benefits from debt pay down and particularly in a reduced interest expense and thats really the framework that we're considering for next.
Year, we'll continue to have a better assessment as we complete this fiscal year and we continue to plan for next year.
Chris Carey: But it's too early to call call the outlook for next year.
Speaker Change: Okay, Okay, Sir one follow up.
Speaker Change: We've received more questions around coffee consumption in recent weeks, some theorizing that whether maybe some driver of some sequential softness in volumes for the entire category.
Speaker Change: What is your assessment of sequential developments in the coffee category and also for your business and how you see the impact of elasticity, perhaps whether any other considerations that we should.
Speaker Change: We should be thinking about going forward from here. Thank you.
Speaker Change: Chris.
That's a tough one to answer just to be totally honest with what what we continue to see is that our.
Business is an at home business.
Speaker Change: For the most part we do have a nice away from home.
Speaker Change: Piece of the business, but the majority of our coffee business is at home.
Speaker Change: The data continues to support 70% of cups consumed are still consumed at home.
Speaker Change: And we do see you know.
Positive usually a bit more consumption around the holidays.
Speaker Change: Obviously that can be related to family gatherings as well, but in general we still feel very.
Speaker Change: Positive around our coffee business in total the consumer as they do shift to different forms whether that's liquid in the past it's been one cup.
Speaker Change: We have demonstrated our ability to shift our portfolio to where the growth is and that's where we're going to continue to focus.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you. Your next question today is coming from Tom Palmer from Citi. Your line is now live.
Tom Palmer: Good morning, Thanks for the question.
Tom Palmer: I wanted to maybe just start off on sweet baked snacks. You noted some of the planned changes here as we roll into the new year packaging displays marketing where are we in kind of the selling cycle to customers. How does have these changes been received do you have visibility at this point into improved distribution.
Tom Palmer: Our merchandising from rolling these changes out.
Speaker Change: Yeah, we haven't we've already are actively engaged with with several of our key customers and those discussions have been positive.
Speaker Change: You know I think at the end of the day being a leader in this category.
Speaker Change: Where we can demonstrate winning they win too and so it really needs to be a win win the way we work with our customers whether in regardless of which channel that is bringing to bear insights data and ultimately thinking holistically about.
Speaker Change: The categories allows us to bring.
Speaker Change: Partnership to to our customers that that they like and they need and then everyone wins. So the goal is to grow not only the hostess business, but to grow the category as well.
Okay. Thanks for that and then I. Appreciate maybe you don't want to comment in full on 'twenty six but you did bring up some of the puts and takes and I wanted to ask on the.
Speaker Change: Stranded costs in the pet segment.
Speaker Change: As we think about some of the TSA unwind here I think it's occurring quite soon and the ability to address stranded costs are there benefits this year or headwinds this year to consider and then just to confirm the number for next year is still 60 cents year over year.
Speaker Change: Yeah, Tom So we have completed the transition services agreement with post holdings.
Speaker Change: That was completed in our second quarter.
Speaker Change: We have called out in this fiscal year and that safety impact of stranded overhead.
Speaker Change: That is.
Speaker Change: Confirmed as an impact to this fiscal year as we move forward into next fiscal year. We have acknowledged that we are working to mitigate or otherwise remove those stranded overhead. So it should not be a drag to earnings as we think about our growth year over year.
But it should be a tailwind right.
Speaker Change: Correct.
Speaker Change: Okay. Thank you.
Speaker Change: Thank you. Your next question today is coming from Alexia Howard from Bernstein. Your line is now live.
Speaker Change: Good morning, everyone.
Speaker Change: Okay.
Speaker Change: Hum.
Speaker Change: It sounds good.
Speaker Change: Just about <unk> got a broad question on the T. L. P. One weight loss drugs.
Speaker Change: More specifically around her.
Speaker Change: How are you tackling the question of gathering information about what the consumer needs that you've obviously got some parts of the portfolio that play well into that segment things like Jif peanut butter, obviously, the pet food and coffee is pretty benign and then we have post test which could be pressured.
Speaker Change: It seems as though that might be as many as mid single digit percentages of U S. Adult on these drugs now and it's obviously likely to escalate and I think that was.
Speaker Change: There were articles out this morning about the potential for Medicare and Medicaid to cover them.
Speaker Change: How are you tackling the question, it's definitely information about what innovation you need to do to.
Speaker Change: To tackle that trend and.
Speaker Change: And how urgently what resources you personally can stand relative to all the developments in the market.
Alexia, it's mark so.
Speaker Change: First of all.
Speaker Change: Thank you for acknowledging the breadth of our portfolio, because obviously being in pet coffee.
Speaker Change: Spread.
Speaker Change: And in other forms of snacking bodes very well because we play in a lot of different categories that win in different way. So appreciate the acknowledgment.
Speaker Change: And then you know.
Speaker Change: As I've said in prior quarters, we look very closely at all of the trends and really a focus on what the consumer is is staying in one thing.
Speaker Change: And specifically we continued to do an ongoing research on the impact of G. L. P. One.
Speaker Change: Trends and what that might mean for our business and the the facts are that at this point, we have seen no material impact to any of our business as a result of that trends acknowledging that snacking would be a logical place where that where we.
Speaker Change: We might see an impact to date, we have not seen anything meaningful.
Speaker Change: That said.
Speaker Change: We're going to continue to monitor it as we always do and we're going to continue to to look for innovation that is relevant for consumers that might be looking to change their diet I mean keep in mind been in business for 127 years, we've been through every different type of Guy.
Speaker Change: Ah trends across the.
The consumer landscape and have effectively provided products that meet their needs whether that's portion size, we could look at reducing sugar with there. There's a whole variety of innovations that we will bring to bear and so really thinking of it as an opportunity as what we have to continue to do all the while.
Monitoring what the impact may be.
Speaker Change: Thank you very much and just a real quick follow up.
Speaker Change: And the divestment and you've said that you expect a 10% hit to earnings. This year is that based on the expectation that it will close.
Speaker Change: And as the third quarter or somewhere in the middle of the third quarter I'm, just trying to get a sense of how much the impact could be going out into next year.
Speaker Change: Yeah, Alexia so on a full year basis, the assortment impact is 25 cents.
Speaker Change: We announced that in the press release around the transaction.
Speaker Change: Impact to this fiscal year.
Speaker Change: We're closing.
Speaker Change: A little bit more than halfway through the year. So it would be probably the middle of our third quarter is 10 status.
Speaker Change: Chesapeake using a $300 million in proceeds from the transaction to pay down debt.
Speaker Change: Which would partially offset that 10 cents, leaving about a nickel therefore kind of immaterial to our overall guidance range our outlook for the year.
Speaker Change: Perfect. Thank you very much I'll pass it on.
Thank you next question is coming from Matt Smith from Stifel. Your line is now live.
Speaker Change: Good morning, Mark. Thank you for the question one of the drivers for the increased comparable sales.
Speaker Change: Is the momentum in across the Bull's growth has been stronger than anticipated you mentioned new products in your remarks, and the increase in capacity, but as we look forward can you talk about the drivers of growth in the second half and beyond are you seeing stronger distribution opportunities or is this more velocity driven as you increase your investment. Thank you.
Speaker Change: Matt I can't believe we debated this long into the call without an inquest suppose question. So thank you.
Speaker Change: Well <unk> is doing fantastic as you saw we did the ribbon cutting hours in Alabama.
Speaker Change: Ah.
Speaker Change: Earlier in the month.
Speaker Change: With the Governor open.
Speaker Change: Opening the third site, which is up and running continuing to expand production there over the next several months but.
Speaker Change: The fact that we're now in demand generating mode allows us to advertise allows us to clearly meet that meet the demand that the consumer is as it is giving us and launch new products. So the raspberry unprofitable peanut butter and raspberry is far exceeding our.
Speaker Change: <unk>, it's a fantastic product we also launched.
Speaker Change: A limited.
Peanut butter only.
Speaker Change: SKU, which will go national next year.
Speaker Change: And.
Speaker Change: Really pleased with the.
Speaker Change: <unk> of the brand and actually overall its exceeding our expectations. So we do expect to hit 900 million. This year, which is ahead of our expectation I think it's safe to say, we're going to meet or exceed the $1 billion in 'twenty six like we said and so we have not put any markers out there for beyond $1 billion.
But we do believe we're going to get beyond the 1 billion with the support of great production great teams in all three plants.
Speaker Change: And frankly.
Speaker Change: The ability to continue to bring out a new new products, a new variety so really bullish on the <unk> business.
Speaker Change: Thank you. Your next question today is coming from Rob Dickerson from Jefferies. Your line is now live.
Rob Dickerson: Great. Thanks, so much instead of a couple of questions Carol on the profitability side.
Speaker Change: Mark maybe Tucker.
Speaker Change: You know I know.
Speaker Change: Historically, there have been times, when you've been willing to provide a little bit of incremental <unk>.
Speaker Change: Color on a per segment basis, just kind of a round.
Speaker Change: Maybe where margin could kind of fall for the full year.
Speaker Change: So kind of first I'm, just asking specifically on coffee arabica coffee all of it.
Speaker Change: These considered doing pretty well in the first half of the year you know what I'm, assuming just given the pass through nature of that come down in the back of the year or so.
Speaker Change:
Speaker Change: I guess first question is just kind of how do you.
As of today like kind of view that op margin for the year playing out.
Speaker Change: Yeah, Rob So I would start big picture and just acknowledge at the total company level, we delivered a strong gross margin in the second quarter better than our expectations, we're able to lock in that over delivery into our EPS guidance range and also a lot to a 37 and a half to 38.
Speaker Change: <unk> gross profit margin outlook for the full year.
And really the portfolio is coming in line with margin expectations at the segment level in some instances some businesses are a little bit better businesses are around sort of therapy or expectation.
Speaker Change: But where you are seeing that margin changes in the coffee portfolio, which we acknowledged coming into this fiscal year and we also acknowledged coming out of our first quarter and Thats really driven by two rounds of price pricing actions to recover ongoing green coffee installation.
Speaker Change: So coffee margins in the first two quarters were very very good.
Speaker Change: Candidly they were up 28% level for both Q1 and Q2.
Speaker Change: But as we get into the third and fourth quarters, you will see that come down substantially the kind of the mid twenty's and low twenties.
Speaker Change: As a result of.
Speaker Change: As a result of that ongoing green coffee inflation as we get into the higher cost.
Speaker Change: A component of our cost structure.
Speaker Change: Okay. Okay, that's very helpful and then.
Speaker Change: Maybe just to touch on a kind of a comment you just made.
Speaker Change: It could be a question, but anyway.
Speaker Change: It seems like there clearly.
There's there are moving pieces around the segments in terms of how profitability is coming in right. I think you said originally.
Pet might've been kind of 25% or so op margins in Q2 might come in a little bit better right. So so far the first half.
Speaker Change: Pets coming in at 28% margin.
Speaker Change: And that's without the release of all the stranded overhead.
Speaker Change: I'm just curious if you're if we're thinking about talking about total portfolio, let's say in the back half like coffee margin comes down a little bit totally understood as to why seems like kind of frozen handheld the spreads kind of may be running around that 23, 24% range pets going a lot better right.
Speaker Change: Right.
Speaker Change: And sweet baked snacks I'm hearing you a little pull forward and some activation, maybe there's a little bit more investment coming in the back half. So is it fair to say just kind of all in the.
Speaker Change: Coffee margins coming down some.
Speaker Change: You know probably higher than we originally thought frozen kind of in line ish and maybe sweet baked snacks comes a little lower in Q4, so net net it all kind of plays okay, but really pet is driving.
Speaker Change: Some of the offset and the funding of some of the other parts of the business. There's a lot in there, but that's all I have thank you.
Rob Dickerson: Rob you are right there is a lot in there.
Speaker Change: But I do want to ignore.
Speaker Change: Understand your framework I think we have a schedule follow up calls so why don't we go through the puts and calls of your of your model then.
Speaker Change: But I certainly understand the framework. Thanks.
Speaker Change: Okay, great. Thanks, a lot.
Thank you next question is coming from Steve powers from Deutsche Bank. Your line is now live.
Steve Powers: Hey, thanks.
Steve Powers: A quick I guess follow up to some extent on the pet business Tucker.
Steve Powers: Called out as he talked about the three key puts and takes.
Steve Powers: Just I guess, you know caution or conservatism acknowledgment of the discretionary nature of treating this would love an update on what youre seeing in that category.
Steve Powers: Also I guess at least sequentially that.
Steve Powers: Kind of a sensitivity to demand has.
Pretty stable.
Steve Powers: We were we were we were looking for things to essentially get worse quarter over quarter and it doesn't seem to have happened. Thus far this year. So I'm just curious what youre seeing in there you're expecting relative sequential stability or.
Speaker Change: Your comments.
Speaker Change: Kind of.
Speaker Change: <unk>.
Speaker Change: Portends another another step down in demand as we go into the back half.
Hey, Steve It's Mark I'll take that one.
Speaker Change: No phone continues to perform and it's essentially for two reasons one is.
Speaker Change: We play across the whole value spectrum. So we've got milk bone has products that compete in value to premium in all of the different treating occasions, whether that's dental or.
Speaker Change: Long lasting chews or just basic biscuits core biscuits, so I'd say the breadth of that brand continues to perform and then secondly, I. Our innovation is working regardless of where we've innovated. It seems to have brought new news drive it's driving sales.
Speaker Change: Notably the innovation, that's been really winning for us at this the peanut buttery bites, which actually contained <unk> and those have been performing exceptionally well.
Speaker Change: So milk bone.
Speaker Change: Although growth has been a little bit subdued because of the discretionary nature of the category continues to perform and even in our soft and chewy segment with pop where we are down we.
Speaker Change: We now are.
Speaker Change: Bringing to bear new plans in terms of refreshing the brand leveraging the fact that that brand has an extremely high <unk>.
Speaker Change: Consumer loyalty and so.
Speaker Change: I'm really.
Speaker Change: Thinking about how we're going to go to market really emphasize the product quality of that product. So we're.
Speaker Change: We're going to support the whole breadth of our snacking portfolio not just milk bone.
Speaker Change: Okay. So it's playing that back it sounds like any any slowdown in your pet business in the third quarter.
Speaker Change: More about just the underlying comps being more difficult than anything.
Speaker Change: Getting more difficult in the actual actual category demand backdrop is that fair yeah. We're not we're not we're not co manufacturing or post any more and so the comps will look.
Speaker Change: Not look great, but we would keep your guys focused on.
Speaker Change: The existing business and the comps apples to apples versus the prior year. So we'll we'll make sure we clarify that with you.
Speaker Change: So Steve we're not we're not calling down any incremental softness to the milk bone brand.
Speaker Change: We're just acknowledging that it's it's growing at a slower rate.
Speaker Change: As a result of the overall discretionary nature of the category and that's kind of embedded in there. So in my comments as it relates to a Q3 were more around a comparable to us just where we're the trading aspect of the category stands and then three is just a mechanical math of co manufacturing sales.
Speaker Change: Yes, okay understood.
Speaker Change: Understood and all of that thanks, so much.
Steve Powers: Thank you Steve.
Speaker Change: Thank you. Your next question today is coming from Max comfort from BNP Paribas. Your line is that life.
Speaker Change: Hi, Thanks for the question going back to coffee I think earlier on this call you mentioned an expectation for flat net sales growth in the second half you just did a 3% sales growth for coffee in the second quarter and I realize you're you're embedding elasticity.
Speaker Change: The assumptions in the second half, but to me that sounds.
Speaker Change: Pretty drastic if I if I heard it right that you would go from a plus three to something that's more like flat in the second half as you bring on pricing for what has historically been a pretty.
Speaker Change: The categories. So just wanted to clarify.
Speaker Change: On your expectation for the coffee topline in the second half thanks.
Speaker Change: Yes Max.
Speaker Change: My comments related to coffee being flat or in our third quarter, we will see.
Speaker Change: A level of growth in our fourth quarter.
Speaker Change: And as you know we've taken two rounds of pricing in the second round of pricing was essentially in mid October. So we'll begin to see the effects of a second round against price elasticity of demand in our early winter and so that's what we also continue to monitor and assess the good news is is that our portfolio.
Speaker Change: Use to perform with the strength of our leadership in the category.
Speaker Change: Okay got it that's helpful and then on on Pet food.
Speaker Change: Repaired remarks had comments about a price cut for me, how mix and higher trade spend.
Speaker Change: In cat food and dog snacks, so putting the.
Speaker Change: The consumer caution aside can you just talk about what youre seeing in the competitive environment and that's informing those types of decisions and I'll leave it there. Thank you very much.
Speaker Change: Yes, Max the Meow mix brand continues to be a bright spot and a highlight of the overall pet portfolio and within the company.
Speaker Change: And we were able to restore some of the promotional activity against the brand, particularly as we can.
Full supply and back end stock against the brand and we continue to drive innovation across the portfolio as well.
Thank you we reached end of our question and answer session I'd like to turn the floor back over for any further or closing comments.
Speaker Change: Kevin. Thank you well first I'd just like to thank everyone for taking the time today and a holiday week to join our call. We had another great quarter and that would not have been possible without our outstanding employees. So as always I'd like to thank them for their continued hard work and.
Speaker Change: Dedication to our company.
We're really looking forward to hosting our Investor day on Tuesday December 10 in New York City and.
Speaker Change: And so for any additional request please reach out to crystal biting.
Speaker Change: And just hope everyone has a very happy Thanksgiving and a great holiday week, and hopefully get some rest over the weekend. So thanks again.
Speaker Change #100: Thank you that does conclude today's teleconference and webcast you may disconnect. Your lines at this time and have a wonderful day we thank.
Speaker Change #100: Thank you for your participation today.