Q3 2025 John B. Sanfilippo & Son Inc Earnings Call
Operator: Operator for today's call.
Operator: At this time, I would like to welcome each and every one of you to the John B Sanfilippo & Son Inc 3rd Quarter Fiscal Year 2025 Operating Results Conference Call. All lines have been placed on mute to prevent any background noise.
This time I would like to welcome each and everyone of you each of the John B Sanfilippo, <unk> son, Inc. Third quarter fiscal year 2025 operating results conference call.
All lines have been placed on mute to prevent any background noise out there. The speaker's remarks, there will be a question and answer session. If you would like to ask a question. During this time simply press star followed by the number one on your telephone keypad. If you would like to be grow your question kind of press star one again.
Operator: After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, kindly press star one again.
Jeffrey Sanfilippo: It is now my pleasure to turn today's call over to John B Sanfilippo & Son Inc Chief Executive Officer, Jeffrey Sanfilippo. Please go ahead. Thank you, Gail. Good morning, everyone, and welcome to our 2025 third quarter earnings conference call. We appreciate you joining us.
Speaker Change: It's about my pleasure today to turn today's call over to John B Sanfilippo, <unk>, Chief Executive Officer Jeffrey Sanfilippo. Please go ahead.
Speaker Change: Thank you Gail good morning, everyone and welcome to our 2025 third quarter earnings Conference call.
Speaker Change: We appreciate you joining us on the call with me today is franc Pellegrino our CFO.
Jeffrey Sanfilippo: On the call with me today is Frank Pellegrino, our CFO. We may make some forward-looking statements today. These statements are based on our current expectations and may involve certain risks and uncertainties. The factors that could negatively impact results are explained in the various SEC filings that we have made, including Forms 10-K and 10-Q. We encourage you to refer to the filings to learn more about these risks and uncertainties that are inherent in our business.
Speaker Change: We may make some forward looking statements today. These statements are based on our current expectations and they involve certain risks and uncertainties and factors that could negatively impact results are explained in the various SEC filings that we have made including forms 10-K and 10-Q.
Speaker Change: Encourage you to refer to the filings to learn more about these risks and uncertainties that are inherent in our business.
Jeffrey Sanfilippo: I'm encouraged to share the positive results and improvements we've made in our financial performance this quarter. Although we saw a decrease in sales volume during the third quarter, we improved our gross profit and achieved a 50% increase in diluted earnings per share. This was driven by, among other things, strategically controlling our costs and the continued alignment of our selling prices with increasing commodity acquisition costs. When we exclude the impact of inventory valuation on the current quarter's gross profit, there is a modest sequential improvement.
Speaker Change: I'm encouraged to share the positive results and improvements we've made in our financial performance this quarter although.
Speaker Change: Although we saw a decrease in sales volume during the third quarter, we improved our gross profit and achieved a 50% increase in diluted earnings per share.
Speaker Change: This was driven by among other things strategically controlling our costs and the continued alignment of our selling prices with increasing commodity acquisition costs.
Speaker Change: When we exclude the impact of inventory valuation on the current quarter's gross profit there was a modest sequential improvement.
Jeffrey Sanfilippo: Like other snack food companies, our third quarter performance was impacted by a challenging macroeconomic and consumer environment. The sales volume decline, coupled with the risk of additional declines due to rising retail selling prices and changing consumer behavior, underscores our strategic priority to execute on our long-range plan and adapt our strategies to meet involving customer needs.
Like other snack food companies, our third quarter performance was impacted by a challenging macroeconomic and consumer environment.
Speaker Change: Sales volume decline, coupled with the risk of additional declines due to rising retail selling prices and changing consumer behavior underscores our strategic priority to execute on our long range plan and adapt our strategies to meet evolving customer needs.
Jeffrey Sanfilippo: To support this, we are committed to investing in our future growth, planning to spend approximately $90 million on equipment to expand our domestic production capabilities and improve our related infrastructure by the end of fiscal 2026. This historic investment in production equipment and infrastructure in our U.S. facilities reflects our confidence in domestic manufacturing.
Speaker Change: To support this we are committed to investing in our future growth planning to spend approximately $90 million on equipment to expand our domestic production capabilities and improve our related infrastructure by the end of fiscal 2026.
Speaker Change: This historic investment in production equipment and infrastructure in our U S facilities reflects our confidence in domestic manufacturing.
Jeffrey Sanfilippo: There is a great deal of uncertainty in the market with macroeconomic factors out of our control that may have an impact on our business. But there is so much that we can control within our company to drive efficiencies, deliver innovation, differentiate our products and services, and optimize our cost structure.
Speaker Change: There is a great deal of uncertainty in the market with macroeconomic factors out of our control that may have an impact on our business.
Speaker Change: But there is so much that we can control within our company to drive efficiencies deliver innovation differentiate our products and services and optimize our cost structure.
Jeffrey Sanfilippo: The investments we are making demonstrate our commitment to growing our business, being a more valued partner to our customers, and providing more job opportunities for the dedicated team members throughout our organization. I would like to thank all our employees who have worked with passion, dedication, and a sense of urgency to manage our business through these challenging times.
Speaker Change: And the investments we are making demonstrate our commitment to growing our business being a more valued partner to our customers and providing more job opportunities for the dedicated team members throughout our organization.
Speaker Change: I would like to thank all our employees, who have worked with passion dedication and a sense of urgency to manage our business through these challenging times.
Jeffrey Sanfilippo: As we face several headwinds impacting the demand for nuts, trail mixes, and bars, let me share how our company is responding to mitigate negative impacts on our business while investing in growth. First, there are higher commodity costs for most nuts we procure, including almonds, walnuts, pecans, and cashews, due to supply and demand volatility. And the cocoa market has continued to stay at almost record prices. We are having difficult discussions with our customers to pass on necessary price increases. At the same time, we are offering options to change product formulas, pack sizes, and product mixes to mitigate these costs.
Speaker Change: As we faced several headwinds impacting the demand for nuts trail mixes and bars, let me share how our company is responding to mitigate negative impacts on our business while investing in growth.
Speaker Change: There are higher commodity cost for most nuts, we procure including almonds, walnuts pecans, and cashews due to supply and demand volatility.
Speaker Change: And the cocoa market has continued to stay at almost record prices, we are having difficult discussions with our customers to pass on necessary price increases at.
Speaker Change: At the same time, we are offering options to change product formulas pack sizes and product mix is to mitigate these cost increases.
Jeffrey Sanfilippo: Second, the impact of tariffs, actual pending implementation or threatened by the U.S. government or other governments on our costs and supply chain. There are items such as cashews, pepitas, pine nuts, and macadamias that do not grow in the U.S. or have little production here. So most of these items are incurring a 10% tariff today, with other products incurring over 140% tariff. We are working very closely with our major customers to define the financial impact of these costs on their finished products and deciding how best to manage purchases, inventories, and potential demand destruction. Our procurement team is doing an extraordinary job looking for alternative suppliers where possible to mitigate supply chain disruption.
Speaker Change: Second the impact of tariffs actual pending implementation or threatened by the U S government or other governments on our costs and supply chain. There are items, such as cashews Peters pine nuts, and macadamia that do not grow in the U S where have little production here. So most of these items are incur.
Speaker Change: During a 10% tariff today with other products incurring over 140% tariff.
Speaker Change: We are working very closely with our major customers to define the financial impact of these costs on their finished products and deciding how best to manage purchases inventories and potential demand destruction.
Speaker Change: Our procurement team is doing an extraordinary job looking for alternative suppliers, where possible to mitigate supply chain disruptions.
Jeffrey Sanfilippo: Third, changing industry trends as consumers' purchasing preferences evolve. There are so many factors impacting consumers today, including inflation, economic volatility, health and wellness, reduced government support through programs such as SNAP, or a variety of other macroeconomic reasons. And even where and how consumers get their information about food has dramatically shifted. JBSS has invested heavily in a robust consumer insights team to track consumption, monitor consumer behavior, and assess price elasticity models, and recommend opportunities for our retail partner to optimize their portfolios with the right products, prices, and promotions. These same recommendations from our Consumer Insights team are also being applied to our brand portfolio, including Fisher Snack, Fisher Recipe, and our Orchard Valley Harvest brand.
Speaker Change: Third changing industry trends as consumers purchasing preferences evolve there are so many factors impacting consumers today, including inflation economic volatility health and wellness reduced government support through programs, such as snap where a variety of other macroeconomic reasons.
Speaker Change: And even where and how consumers get their information about food has dramatically shifted.
Speaker Change: <unk> has invested heavily in a robust consumer insights team to track consumption monitor consumer behavior, and assess price elasticity models and recommend opportunities, where our retail partner to optimize their portfolios with the right products prices and promotions.
Speaker Change: These same recommendations from our consumer insights team are also being applied to our brand portfolio, including Fisher snack Fisher recipe and Orchard Valley Harvest brand.
Jeffrey Sanfilippo: It is a difficult environment for most brands across the snack category as consumers have tightened their wallets due to current inflationary pressure. But we continue to focus on expanding distribution, building brand awareness and trial with innovative marketing programs and allocating a portion of the sales to support our partner, Conscious Alliance, to help end child hunger.
Speaker Change: It is a difficult environment for most brands across the snack category as consumers have tightened their wallets due to current inflationary pressures.
Speaker Change: But we continue to focus on expanding distribution building brand awareness and trial with innovative marketing programs and allocating a portion of the sales to support our partner conscious alliance to help and child hunger.
Frank Pellegrino: I will now turn the call over to Frank to discuss our fans. Thank you, Jeffrey. Starting with the income statement, net sales for the third quarter of fiscal 2025 decreased 4% to $260.9 million, compared net sales of $271.9 million for the third quarter of fiscal 2024. The decrease in net sales was due to a 7.9% decrease in sales volume, or pounds sold to customers. which was partially offset by a 4.2% increase in the weighted average sales price per pound. The increase in the weighted average selling price primarily resulted from higher commodity acquisition costs for all major...
Frank: I will now turn the call over to Frank to discuss our financial performance.
Frank: Thank you Geoffrey.
Frank: Starting with the income statement net sales for the third quarter of fiscal 2025 decreased 4% to $260 9 million compared to net sales of $271 9 million for the third quarter of fiscal 2024.
Frank: The decrease in net sales was due to a seven 9% decrease in sales volume our pounds sold to customers, which was partially offset by a four 2% increase in the weighted average sales price per pound.
Frank: The increase in weighted average selling price primarily resulted from higher commodity acquisition costs for all major tree nuts.
Frank Pellegrino: Sales volume declined for substantially all major product types in the third quarter. Sales volume decreased 9.2% in the consumer distribution channel primarily due to an 8.3% decrease in private brand sales volume. The private brand volume decrease was due to a 16% reduction in bars volume mainly due to reduced sales to a mass merchandising retailer following an increase in bar sales from a third quarter of fiscal 2020. Our strategic decision to reduce sales to a grocery retailer and lost distribution in our grocery retailer further contributed to the decline in bars volume. Additionally, decreases in sales of almonds, snack nuts, and trail mix, caused by higher retail prices and the discontinuation of peanut butter at the same mass merchandising retailer, contributed to the overall reduction in sales volume.
Frank: Sales volume declined for stamps substantially all major product types in the third quarter.
Frank: Sales volume decreased nine 2% in the consumer distribution channel, primarily due to an eight 3% decrease in private brand sales bought private brand sales volume.
Frank: The private brand volume decrease was due to a 16% reduction in bars.
Frank: Mainly due to reduced sales seven mass merchandising retailer following an increase in bar sales from a national brand recall in the third quarter of fiscal 2024.
Frank: Our strategic decision to reduce sales for our grocery retailer and loss distribution in our grocery retailer third contributed to the decline in bars volume.
Frank: Additionally, decreases in sales of almonds snack nuts, and trail mix caused by higher retail prices and the.
Frank: This continuation of peanut butter at the same mass merchandising retailer contributor to the overall reduction in sales volume.
Frank: Okay.
Frank Pellegrino: These declines were partially mitigated by increased sales of walnuts and pecans at the same retailer along with new distribution at two grocery store customers. Sales volume decreased 12.9% for our branded products, primarily driven by a 33.8% reduction or to the value of harvest sales, mainly due to delayed orders from a major customer in the non-food sector. Sales volume decreased 8.3% in the Commercial Ingredients Distribution Channel, mainly driven by decreased sales volume due to competitive pricing pressures and decreased food service peanut butter sales. Sales volume increased 6% in the contract manufacturing distribution channel primarily due to increased granola volume processed in our Lakeville facility.
Frank: These declines were partially mitigated by increased sales of walnuts and pecans at the same retailer along with new distribution at two grocery store customers.
Frank: Sales volume decreased 12, 9% for our branded products, primarily driven by a 33.
Frank: 8% reduction Orchard Valley harvest sales, mainly due to delayed orders from a major customer in the non food sector.
Frank: Sales volume decreased eight 3% in the commercial ingredients distribution channel, mainly driven by decreased sales volume due to competitive pricing pressures.
Frank: And decreased foodservice peanut butter sales.
Frank: Sales volume increased 6% in the contract manufacturing distribution channel, primarily due to increased granola volume processed in our lakeville facility.
Frank Pellegrino: Sales new customers and opportunistic sales of current customer also contributed to the overall These gains were significantly offset by reduced peanut sales volume to a major customer due to soft consumer Gross profit increased by $6.7 million, or 13.7% to $55.9 million, compared to the third quarter of last year, driven by inventory valuation adjustments that we anticipated, driven by rising commodity input costs, which may not recur next quarter. The inventory valuation adjustment was primarily driven by a transition from a lower cost to a higher cost crop year for walnuts and peaches. To a lesser extent, gross profit benefited from favorable manufacturing.
Frank: Sales to new customers and opportunistic sales of our current customer also contributed to the overall increase.
Frank: These gains were significantly offset by reduced peanut sales volume to a major customer due to soft consumer demand.
Frank: Gross profit increased by $6 7 million or 13, 7% to $55 9 million compared to the third quarter of last year, driven by inventory valuation adjustments that we anticipated driven by rising commodity input costs, which will not recur next quarter.
Frank: Inventory valuation adjustment was primarily driven by a transition from a lower cost to a higher cost crop year for walnuts and pecans.
Frank: To a lesser extent gross profit benefited from favorable manufacturing efficiencies.
Frank Pellegrino: These gains are partially offset by higher commodity acquisition costs for all major trade-ons. Third quarter gross profit margin as percentage of net sales increased to 21.4% compared to 18.1% for the third quarter fiscal 2024 due to the reasons previously mentioned.
Frank: These gains were partially offset by higher commodity acquisition costs for our major treatments.
Frank: Third quarter gross profit margin.
Frank: As a percentage of net sales increased to 21, 4% compared to 18, 1% for our third quarter fiscal 2024 due to the reasons previously mentioned.
Okay.
Frank Pellegrino: Total operating expenses for third quarter decreased $3.1 million compared to prior quarter mainly due to reduction in incentive compensation which was partially offset by an increase in rent expense from our new Huntley, Illinois. Total operating expenses for the 3rd quarter of 2025 decreased to 10.6% of net sales from 11.3% for last year's 3rd quarter due to the reasons previously mentioned and was partially offset by lowered net sales. Interest expense was $1.1 million for the 3rd quarter of fiscal 2025, compared to $800,000 for the 3rd quarter of fiscal 2020.
Frank: Total operating expenses for the third quarter decreased $3 1 million compared to prior year quarter, mainly due to reduction in incentive compensation expense.
Frank: Which was partially offset by an increase in rent expense from our new Huntley, Illinois facility.
Frank: Total operating expenses for the third quarter of 2025 decreased to 10, 6% of net sales from 11, 3% for last year's third quarter due to the reasons previously mentioned and was partially offset by lower net sales base.
Frank: Interest expense was $1 1 million for the third quarter of fiscal 2025 compared to 800003rd quarter fiscal 2024.
Frank Pellegrino: Net income for the third quarter of fiscal 2025 was $20.2 million or $1.72 per diluted share, compared to $13.5 million or $1.15 per diluted share for the third quarter of fiscal 2024.
Frank: Net income for the third quarter of fiscal 2025 was $20 2 million.
Frank: $1 72 per diluted share.
Frank: We're at $13 5 million or $1 15 per diluted share for the third quarter of fiscal 2024.
Frank Pellegrino: Now let's take a look at Inventory. The total value of inventories on hand at the end of the current third quarter increased $47.1 million, or 22.4%, compared to the total value of inventories on hand at the end of the prior year's comparable quarter. The increase was mainly due to higher quantities and cost of finished goods, work in process, and almonds. as well as higher commodity acquisition costs for walnuts and The weighted average cost per pound of raw nut and dried fruit increased 33.9% year-over-year, mainly due to higher commodity acquisition costs for almost all major traders.
Frank: Now taking a look at inventory.
Frank: The total value of inventories on hand at the end of the current third quarter increased $47 1 million or 22, 4% compared to the total value of inventories on hand at the end of the prior year comparable quarter.
Frank: The increase was mainly due to higher quantities and cost of finished goods work in process and almonds.
Frank: As well as higher commodity acquisition costs for walnuts and pecans.
Frank: The weighted average cost per pound of raw nut and dried fruit increased 33, 9% year over year.
Frank: Mainly due to higher commodity acquisition costs for Omar.
Frank: For almost all major treatments.
Frank Pellegrino: Moving on to year-to-date results. Net sales for the first three quarters of fiscal 2025 increased 5.1% to $838.2 million compared to the first three quarters of fiscal 2024. Excluding the 2025 first quarter impact, the Lakeville Act was Net sales remain relatively unchanged, rising slightly from $792.2 million to $797.7 million. Sales volume increased 6.7% primarily due to Lakeville Equity. Excluded in the impact of the Lakewood Acquisition, Stella's Vine remained relatively uncharted. Gross profit margin decreased from 20.6% to 18.5% on that sale. The decrease was mainly attributable. to increase commodity acquisition costs for Sofancia All-Major Nuts. As well as competitive pricing pressures and strategic pricing decisions, which were offset by factors cited previously and improved profitability on bars due to manufacturing efficiency.
Frank: Moving onto year to date results.
Frank: Net sales for the first three quarters of fiscal 2025 increased five 1% to $838 2 million compared to the first three quarters of fiscal 2024.
Frank: Excluding the 2025 first quarter impact of the Lakeville acquisition.
Frank: Sales remained relatively unchanged rising slightly from 792 point $792 2 million to $797 7 million.
Frank: Sales volume increased six 7%, primarily due to <unk> acquisition <unk>.
Frank: Excluding the impact of Allegro acquisition sales volume remained relatively unchanged.
Frank: Gross profit margin decreased from 26% to 85% of net sales.
Frank: The decrease was mainly attributable.
Frank: The increased commodity acquisition costs for substantially all major major nuts.
Frank: As well as competitive pricing pressures and strategic pricing decisions, which were offset by factors cited previously and improve profitability bars due to manufacturing efficiencies.
Frank Pellegrino: Total operating expenses for the current year today decreased by $3.5 million to $90.1 million compared to $93.6 million for the first three quarters of fiscal 2024. The decrease in total output expenses was mainly driven by decreases in incentive compensation, advertising, and consumer insight expenses. These decreases were partially offset by a one-time bargain purchase gain from the Lakeville acquisition, which did not repeat in the current year-to-date period. as well as increases in salary and wages, freight, and rent. Interest expense was $2.3 million for the first three quarters of fiscal 2025 and $2.1 million for the first three quarters of fiscal 2024.
Frank: Total operating expenses for the current year to date decreased by $3 5 million to $90 1 million compared to $93 6 million for the first three quarters of fiscal 2024.
Frank: The decrease in total operating expenses was mainly driven by decreases in incentive compensation advertising and consumer insight expenses.
Frank: These decreases were partially offset by a one time bargain purchase gains from the <unk> acquisition, which did not repeat in the current year to date period.
Frank: As well as increases in salary wages freight expenses.
Frank: Interest expense was $2 3 million for the first three quarters of fiscal 2025, and $2 1 million for the first three quarters of fiscal 2024.
Frank Pellegrino: Net income for the first three quarters of fiscal 2025 was $45.4 million, or $3.87 per diluted share, compared to net income of $50.2 million, or $4.30 per diluted share, for the first three quarters of fiscal 2024.
Net income for the first three quarters of fiscal 2025 was $45 4 million or $3 87 per diluted share compared to net income of $50 2 million or $4 30 per.
Frank: Per diluted share for the first three quarters of fiscal 2024.
Frank Pellegrino: Please refer to our 10-Q for additional details regarding our financial performance for the third quarter of fiscal 2025.
Frank: Please refer to our 10-Q for additional details regarding our financial performance for the third quarter fiscal 2025 now.
Jeffrey Sanfilippo: Now I'll turn the call over to Jeffrey to provide additional comments. on our April results for 3rd Quarter Fiscal 2025 and discuss Category 2. Thanks, Frank.
Jeffrey Sanfilippo: Now I'll turn the call over to Jeffrey provide additional comments.
Jeffrey Sanfilippo: On our operating results for the third quarter of fiscal 2025 and discuss category trends.
Speaker Change: Thanks Frank.
Jeffrey Sanfilippo: Turning to category updates, I'll share the category and brand results for the quarter. All the market information I'll be referring to is Cercana panel data, and for today it is the period ending March 30th, 2025. When I refer to Q3, I'm referring to 13 weeks of the quarter ending March 30th, 2025. References to changes in volume are versus the corresponding period one year ago. For pricing commentary, we are using scanned data from Circona, which includes food, drug, mass, Walmart, military, and other outlets, and we are referring to average price per pound. We are using the nut, trail mix, and bar syndicated views of the category as defined by Circona.
Speaker Change: Turning to category updates, we'll share the category and brand results for the quarter.
Speaker Change: All the market information I'll be referring to as <unk> panel data and for today. It is the period ending March 32025, when I refer to Q3, I'm, referring to 13 weeks of the quarter ending March 32025.
Speaker Change: References to changes in volume are versus the corresponding period, one year ago.
Speaker Change: For pricing commentary, we're using scan data from <unk>, which includes food drug mass Wal Mart military and other outlets and we are referring to average price per pound or.
Speaker Change: Using the nut trail mix and bars syndicated views of the category as defined by <unk>.
Jeffrey Sanfilippo: In the latest quarter, we continue to see modest growth in the broader snack aisle, as defined by Cercana. Volume and dollars were up 2% and 3% respectively. This is consistent with the performance we saw in Q2. In Q3, the snack nut and trail mix category was down 2% in pounds and up 2% in dollars as we saw prices start to rise. This is slightly worse volume performance than we saw in Q2, but similar dollar performance. We saw prices rise 2% in snack nuts and 3% in trail mixes with almonds, mixed nuts and pistachios all showing higher prices.
Speaker Change: In the latest quarter, we continued to see modest growth in the broader snack aisle as defined by store kind of volume and dollars were up 2% and 3% respectively.
Speaker Change: This is consistent with the performance we saw in Q2.
Speaker Change: In Q3, the snack nut and trail mix category was down 2% in pounds and up 2% in dollars as we saw prices start to rise.
Speaker Change: This is slightly worst volume performance than we saw in Q2, but similar dollar performance.
Speaker Change: We saw prices rise, 2% in snack nuts, and 3% in trail mixes with almonds mixed nuts, and pistachios, all showing higher prices.
Jeffrey Sanfilippo: Fisher's Snack & Trail Mix performed worse than the category, with pound shipments down 17%. This was driven primarily by declines at a major specialty retailer due to inventory changes and not repeating a promotion. Southern style nut brand pound shipments increased 10% driven primarily by velocity growth in mass and economy. Orchard Valley Harvest brand, which primarily plays in trail mix, was down 34% in pound shipments, driven by delayed orders from a specialty retailer. Excluding that customer, pound shipments were actually up 11% with strong growth in club and e-commerce. Commodity increases, including cocoa and some tree nuts, are resulting in higher prices for Orchard Valley Harvest.
Speaker Change: Fisher snack and trail mix performed worse than the category with pound shipments down 17%. This was driven primarily by declines at a major specialty retailer due to inventory changes and that repeating a promotion.
Speaker Change: And southern style nuts brand pound shipments increased 10% driven primarily by velocity growth in mass and e-commerce.
Orchard Valley Harvest brand, which primarily plays in trail mix was down 34% in pound shipments driven by delayed orders from a specialty retailer.
Speaker Change: Excluding that customer pound shipments were actually up 11% with strong growth in club and E Commerce.
Speaker Change: Commodity increases, including cocoa and some tree nuts are resulting in higher prices for Orchard Valley harvest, we continue to focus on innovation and cost savings opportunities to mitigate the significant commodity pressure.
Jeffrey Sanfilippo: We continue to focus on innovation and cost savings opportunities to mitigate the significant commodity pressure. Our private label consumer snack and trail shipments perform relatively in line with the category with pound shipments down 3% versus last year.
Speaker Change: Our private label consumers snack and trail shipments performed relatively in line with the category with pound shipments down 3% versus last year.
Jeffrey Sanfilippo: Now let me turn to the RecipeNut category. In Q3, the RecipeNut category was down 1% in pounds and up 10% in dollars, as prices for both walnuts and pecans continued to increase. This is an improvement in dollar performance and relatively stable volume performance versus Q2.
Speaker Change: Now, let me turn to the recipe nut category in Q3, the recipe nut category was down 1% in pounds and up 10% in dollars as prices for both walnuts and pecans continued to increase.
Speaker Change: This is an improvement in performance and relatively stable volume performance versus Q2.
Jeffrey Sanfilippo: Fisher Recipe pound shipments were down 3% in Q3, with volume softness tied to increased cost of our commodities.
Speaker Change: Our risk Fisher recipe powered shipments were down 3% in Q3 with volume softness tied to increased cost of our commodities.
Jeffrey Sanfilippo: Now let's switch over to the bar category. In Q3, the bars category continued to rebound as a major player continued to re-enter the market after a recall last winter. The category grew 6% in pounds and 8% in dollars. Private label was down 1% in pounds and up 2% in dollars as the previously mentioned national brand retook some of the share it lost to private label last year. Our private label bar shipments were down 16% versus a year ago as we lapped significant growth after filling empty shelves because of the national brand recall.
Now, let's switch over to the bar category in Q3, the bars category continued to rebound as EMEA or major player continued to reenter the market. After a recall last winter the category grew 6% in pounds and 8% in dollars.
Speaker Change: Private label was down 1% in pounds and up 2% in dollars as the previously mentioned National brand. We took some of the share it lost to private label last year.
Speaker Change: Our private label bar shipments were down 16% versus a year ago as we lap significant growth after filling empty shelf because of the national brand recall.
Jeffrey Sanfilippo: In closing, as we look ahead, maintaining agility and swiftly adapting to the dynamic external environment is imperative to our business. We continue to monitor the impact and timing of import tariffs and internationally sourced items, which represent approximately 15 to 20% of all our raw material purchases. As I mentioned, items such as cashews and pepitas do not grow in the United States and we are proactively working with strategic suppliers to quantify the potential impact of tariffs and develop solutions to manage cost increases while ensuring minimal disruptions to our supply chain. Additionally, we are collaborating closely with customers to assess the impact of tariffs on retail selling prices and consumer demand, and to identify solutions to attempt to mitigate that impact.
Speaker Change: In closing as we look ahead, maintaining agility and swiftly adapting to the dynamic external environment is imperative to our business.
Speaker Change: We continue to monitor the impact and timing of import tariffs and internationally sourced items, which represent approximately 15% to 20% of all our raw material purchases.
Speaker Change: As I mentioned items, such as cash used <unk> do not grow in the United States and we are proactively working with strategic suppliers to quantify the potential impact of tariffs and developed solutions to manage cost increases, while ensuring minimal disruptions to our supply chain.
Speaker Change: Additionally, we are collaborating closely with customers to assess the impact of tariffs and retail selling prices in consumer demand and to identify solutions to attempt to mitigate that impact. Furthermore, we will continue to rigorously pursue opportunities to enhance internal efficiencies and drive long term shareholder value.
Jeffrey Sanfilippo: Furthermore, we will continue to rigorously pursue opportunities to enhance internal efficiencies and drive long-term shareholder value. I am confident in the strategic investments we have made in our people, customers, and capabilities to overcome these challenges and deliver strong operating results. Our company and our team of dedicated leaders and associates throughout the organization remain steadfast and strong. We have always adapted quickly to overcome headwinds. In our insights, innovation, R&D, marketing, sales, operation, finance teams across the organization are focused on consumer behavior, consumption trends to develop new products, pursue new opportunities and manage our financial performance and inventory levels.
Speaker Change: I am confident in the strategic investments, we have made in our people customers and capabilities to overcome these challenges and deliver strong operating results.
Speaker Change: Our company and our team of dedicated leaders and associates throughout the organization remains steadfast in strong we have always adapted quickly to overcome headwinds and our insights innovation R&D marketing sales operation finance teams across the organization are focused on consumer Bill.
Speaker Change: <unk> consumption trends to develop new products pursue now opportunities and manage our financial performance and inventory levels.
Jeffrey Sanfilippo: We have the right strategies, talent, and commitment to quality and service to continue to grow and provide exceptional value for our customers and our consumers.
Speaker Change: We have the right strategies talent and commitment to quality and service to continue to grow and provide exceptional value for our customers and our consumers.
Jeffrey Sanfilippo: We appreciate your participation in the call and thank you for your interest in our company.
Speaker Change: We appreciate your participation in the call and thank you for your interest in our company.
Operator: I will now turn the call back over to Gail to open the line for questions. Thank you. At this time, I would like to remind everyone that in order to ask a question, press star then the number 1 on your telephone keypad. We will pause for just a moment to compile the Q&A run.
Gail: I will now turn the call back over to Gail to open the line for questions.
Speaker Change: Okay.
Speaker Change: Thank you.
John: John I would like to remind everyone that in order to ask a question Chris.
Speaker Change: On your telephone keypad.
Speaker Change: We'll pause for just a moment to compile the Q&A.
Nick Otton: Okay, so your first question comes from the line of Nick Otton with CWB Wealth. Please go ahead. Hi guys, just wanted to start the questions off on the tariff exposure. So for that 15 to 20% raw materials exposure, do you think you'll be able to pass off this cost to your customers just in general because it's everyone in the industry affected? Yeah, so we everyone is in effect in the industry, we are focused on the main commodities that drive the biggest value in tariffs. Those are the there's three or four key items, key customers that those impact.
Speaker Change: Okay. So your first question comes from the line of Nick Hotchkin with CDW.
Speaker Change: Please go ahead.
Nick Hotchkin: Hi, guys.
Nick Hotchkin: I just wanted to start the questions off on the tariff exposure so for that 15% to 20% raw materials exposure, you think youll be able to pass off this cost.
Nick Hotchkin: To your customers just in general because it's everyone in the industry affected.
Nick Hotchkin: Yes, so everyone is affecting the industry. We are focused on the main commodities that drive the biggest value in tariffs. Those are there is three or four key items key customers that those impact. So we're having discussions today or we've had discussions with our customers about windows increases impact there.
Jeffrey Sanfilippo: So we're having discussions today, or we've had discussions with our customers about when those increases impact their product, their finished goods on the shelf. And so we will work to pass on those tariffs with our key customers, some of the smaller items where it's less than a 10% increase on finished goods, we will see about optimizing kind of production managing inventory on those. But the key items that have the most volume and value, those will have passed on increases to So like if that 46% comes back, overall, you'll pass it on for Vietnam. Correct.
Nick Hotchkin: Their finished goods on the shelf and so we will work to pass on those tariffs with our key customers some of the smaller items, where its less than a 10% increase in finished goods, we will see about optimizing kind of production and managing inventory on those but the key items that had the most volume and value.
Nick Hotchkin: We have passed on increases to customers.
Greg Engel: So I get about 46% comes back overall Youll pass it off and for Vietnam, Greg Engel.
Speaker Change: Correct, and then I guess on your cash use business like just trying to do some rough math last night app yearly like it kind of looks like its a breakeven business is that fair to say or is like what's the kind of the earnings in that area overall.
Jeffrey Sanfilippo: And then I guess on your cashew business, like just trying to do some rough math last night after your release, like what, it kind of looks like it's a break-even business. Is that fair to say, or is like, what's the kind of earnings in that area overall? Which commodity, sorry, was that cashews? Yeah, you're catchy as a mixed nuts egg. No, it's a profitable segment. I think if the 46% tariffs come across that, that would be a challenge to one, to get those price and price increases through and then the impact of consumer demand will be dramatic.
Greg Engel: Which commodity side was that cashews.
Speaker Change: Cashews and mixed nuts segment.
Speaker Change: It's a profitable segment I think if the 46% tariffs come across assets will be a challenge to one to get those pricing price increases through and then the impacted consumer demand will be dramatic, but currently cashews and mixed nuts are consistent with our overall.
Jeffrey Sanfilippo: But currently cashews and mixed nuts are consistent with our overall profit profile. Yeah, I would add to over the last couple of years, since cashew prices came down to almost historic lows, we did see growth in the cashew segment in the snack category, I think with these higher prices that are even separate from the from the tariffs, just the commodity supply and demand, we've seen increasing cashews, I think you'll see a shift in consumption away from cashews to almonds, peanuts, and some of the other lower priced retail products, but still still Profitable item for us, but as Frank said with these increases in tariffs potentially you could see more demand destruction as we do pass those And then is there, if you can't pass them on, would you just get out of the cashew business overall?
Speaker Change: Profile.
Speaker Change: Yes, I would add so over the last couple of years since cashew prices came down to almost historic lows. We did see growth in the cash use segment in the snack category I think with these higher prices that are even separate from the from the tariffs just the commodity supply and demand we've seen increase in cash use I think youll see a shift in consumption away.
Speaker Change: From cash used to all men's peanuts, and some of the other lower priced retail products.
Speaker Change: Phil.
Speaker Change: Profitable item for us, but as Frank said with these increases in tariffs potentially you could see more demand destruction as we do pass those increases on.
Speaker Change: And then in there.
Speaker Change: If you can't pass the bond would you just get out of the Kashi business overall.
Jeffrey Sanfilippo: So it's still a big piece of the business. I don't know if we would get out of it completely. I will say that if these higher tariffs do hit, just like we're having conversations with key retailers today at Pepitas that come mainly from China with a 145% increase, those discussions are taking place when those potential increases hit finished goods in July, August. So the questions are whether the retailers will still continue those items or hold off and wait until prices come back down and just not have them available. We have seen some retailers that are doing just that.
Speaker Change: So it's still a big piece of the business I don't know if you would get out of a completely I will say if these higher tariffs do head just like we're having conversations with key retailers today at <unk> that come mainly from China with a 145% increase both discussions are taking place when those potential increases hit finished goods in July.
Speaker Change: Hi August.
Speaker Change: The questions are whether the retailers will still continue those items or hold off and wait until prices come back down and just not not have them available on the shelf. We have seen some retailers that are doing just that that's a straight pepita item that is sold at retail those some of those retailers are saying lets us not buy the item and wait till.
Jeffrey Sanfilippo: There's a straight pepita item that is sold at retail. Those, some of those retailers are saying, let's just not buy the item and wait till the markets come down again. And Nick, one add-on to cashews, if the 45% or so tariffs from Vietnam do come back, like Jeffrey said, consumer demand will decline, which will result in the underlying cashew price has declined because of the lower demand. So in theory, some of the increase due to the tariff will be offset by a lower commodity cost of the underlying cashew. And then would you just be set up to like, you could capture this back though, where like you said, consumers buy more peanuts, pecans, walnuts, something like that as well.
Speaker Change: The market's come down again.
Speaker Change: One add on to cashews.
Speaker Change: The 45% ourselves tariffs from Vietnam do come back like Jeffrey said consumer demand will decline, which will result in the underlying cashew prices has declined because of the lower demand. So in theory as some of the increase due to the tariff will be offset by a lower commodity cost all the underlying cashew.
Speaker Change: And then would you just be set up to like you could capture this back, though where you say consumers buy more peanuts, pecans walnuts something like that as well.
Jeffrey Sanfilippo: I think we need to switch to that. Yeah, we anticipate it.
Speaker Change: Absolutely to switch to that yes.
Speaker Change: Yes, we anticipate I guess, we'll see.
Yes.
Nick Otton: Just for myself so I have some understanding, just on the inventory transition that you discussed, so do you still expect to be in that $0.60 per pound gross margin level range in the next quarter and going forward with the price increases that you put in place? The price increases went in place during the current quarter. I think, Nick, the best way to look at it is if you look at our gross profit section, if you just back out the impact of the inventory valuation, which we cited in the release in the queue, and that should be a good indication of what our gross profit per pound should be going forward.
Speaker Change: Just for myself side, some understanding just on the inventory transition that you discussed so do you still expect to be in that 60 per pound gross margin level range in the next quarter and going forward.
Speaker Change: With the price increases that you've put in place.
Nick Hotchkin: The price increases went in place during the current quarter I think Nick the best way to look at it is if you look at our gross profit section. If you just back out the impact of the inventory valuation, which we cited in the release in the Q and that should be a good indication of what our gross profit per pound should be going forward.
Speaker Change: Sure.
Speaker Change: Okay.
Nick Otton: Okay, and then.
Speaker Change: Okay and then.
Nick Otton: That $90 million spend, is that the addition of two more bar lines to your bar business overall? So yeah, so Nick, good question. It's a big investment we're making. It's a combination of things. So we do believe there's opportunity for growth in the bar category. So some of that $90 million is going towards bar infrastructure. As we talked about in previous calls, we moved our warehouse distribution center to Huntley, Illinois, just down the street to free up space in our Elgin headquarters to expand production. So a big chunk of that will go to expanding bar capabilities, but also other parts of our business to expand production capacity.
Speaker Change: That $90 million spend is that the addition of two more buyer lines too.
Speaker Change: Our business overall.
Speaker Change: Yes.
Speaker Change: Good question, it's a big investment, we're making and it's a combination of things. So we do believe there is opportunity for growth in the bar category. So some of that $90 million is going towards bar infrastructure as we've talked about in previous calls we moved our warehouse distribution center to help me, Illinois, just down the street to free up space in our Elgin headquarters to.
Speaker Change: <unk> production.
Speaker Change: A big chunk of that will go to expanding our capabilities, but also other parts of our business to expand production capacity.
Nick Otton: I was just wondering too, you're comped on incremental capital at 10%, so I was wondering is that the hurdle rate or what's the underwriting return that you're expecting on that investment? That's correct. 10% is the correct number.
Speaker Change: I was just wondering do you like.
Speaker Change: You are comped on incremental capital at 10%. So I was wondering is that that hurdle rate or what the underwriting.
Speaker Change: Return that youre expecting on that investment.
Speaker Change: That's correct.
Speaker Change: 10% of the correct number to use.
Nick Otton: All right, and then I guess on bars, if we exclude that impact from The one producer just being out of the market for a bit, like how did bars perform overall? Did they grow? Were they flat without this effect? I was just wondering, getting down.
Speaker Change: Alright, and then I guess on bars, if we exclude that impact from.
Speaker Change: One producer just being out of the market for a bit like how did bars perform overall.
Speaker Change: Did they grow.
Speaker Change: A flat without this effect that I was just wondering getting down to it.
Jeffrey Sanfilippo: So the exciting news is, as we took on some of the private label share grew within the category because of that, that recall, we have seen a lot of that stick. So private label has definitely gained market share within the category, which we're excited to So it's, it's, it's quite substantial to that the recall lasted a long time. So consumers, in some cases, had no choice but to buy private label. But once they were in it, they saw the quality, the value proposition, a lot of those consumers have stayed with private label. And with this changing economy and the volatility in the market today, we're seeing a lot of consumers not only stay in private label, but shift to private label for those lower retail price goods.
Speaker Change: So the exciting news is as we took on some of the private label share grew within the category because of that that recall.
Speaker Change: We have seen a lot of that stake. So private label has definitely gained market share within the category, which we're excited to see so it's quite substantial to the recall last a long time. So consumers in some cases had no choice, but to buy private label, but once they were in it they saw the quality the value proposition.
Speaker Change: A lot of those consumers have stayed with private label and with this changing economy and the volatility in the market today, we're seeing a lot of consumers not only stay in private label, but shift to private label for those lower retail price goods.
Nick Otton: Alright, thanks guys. Great quarter. Thanks.
Speaker Change: Alright, thanks, guys great quarter.
Operator: I don't have any more Thank you, Nick.
Speaker Change: Thanks, I don't have any more questions.
Nick Hotchkin: Thank you Nick.
Operator: Again, if you would like to ask a question, press star and the number 1 on your telephone.
Speaker Change: Again, if you would like to ask a question press star and the number one on your telephone.
Operator: All right, we see no more hands for questioning and that concludes our Q&A session for today. I'm sorry for that.
Speaker Change: Alright, we see no more hence for our questioning and that concludes our Q&A session for today.
Speaker Change: I'm sorry for that.
Ronald Mitterko: We do have another question from Ronald Mitterko. with a private investor.
Ronald: Other question from Ronald.
Speaker Change: Methodical.
Speaker Change: <unk> a private investor. Please go ahead.
Jeffrey Sanfilippo: Please go ahead. Thank you. Hey, guys. Good, good quarter and managing through a difficult time. Quick one in regards to inventory. So I guess A and B. One, the first one is, are you seeing any light at the end of the tunnel in terms of price or cost increases for many of the nuts out there outside of the tariff issues? And then number two is the increase in pounds and price per pound. Is that telling us anything outside of seasonality? Sure, so I'll cover the first question, Ronald, as far as commodities. So we have seen stability in some of the markets.
Speaker Change: Thank you.
Speaker Change: Hey, guys.
Speaker Change: Good quarter and managing through a difficult time.
Speaker Change: Just one.
Speaker Change: Quick one in regards to inventory so.
Speaker Change: I guess the one.
Speaker Change: First one is are you seeing.
Speaker Change: Yes, any light at the end of the tunnel in terms of.
Speaker Change: Price or cost increases for sure.
Speaker Change: Many of the naphtha out there outside of the tariff issues and then number two is the increase in <unk>.
Speaker Change: In pounds.
Speaker Change: And price per pound.
Speaker Change: Is that telling us anything outside of seasonality.
Speaker Change: Sure. So I'll cover the first question Ronald first commodity so we have seen stability in some of the markets. So cashews for example, actually came down a little bit.
Jeffrey Sanfilippo: So cashews, for example, actually came down a little bit since they hit historic highs. We've seen some stability there. And I believe with the demand destruction that we're going to see with these high retail prices, we should expect some of those commodity prices to come down further. I would say the same for potentially almonds and some of the other nut commodities, these high retail prices, which were passed on in January. There'll be additional increases in June, July time period. Those retail prices will get tough for some consumers. So we should expect some of those retail commodity costs to come down as a result of lower.
Speaker Change: Since David hit Historic highs. So we've seen some stability there and I believe with the <unk>.
Speaker Change: Demand destruction that we're going to see with these high retail prices, we should expect some of those commodity prices have come down further I would say the same for potentially almonds and some of the other commodities is high retail prices, which were passed on in January there'll be additional increases in June July time period of those retail prices will get tougher.
Speaker Change: Some consumers. So we should expect some of those commodity cost to come down as a result of lower demand.
Jeffrey Sanfilippo: Right, I guess. And that had been part of the strategy.
Speaker Change: Great.
Speaker Change: It had been part of the strategy and Ian just to sneak another one in before.
Frank Pellegrino: And, you know, just to sneak another one in before, you know, Part B question gets answered. So, am I to understand or are we to understand? I think Nick asked questions about, like, gross margin, you know, and in the near term. And we're looking at, you know, 18 and a half percent, which was X, the IVA, to be, like, what you're shooting for. That's on Cogswood. I mean, we're on, yeah. Okay, thank you.
Speaker Change: Part D question, what Sanjay.
Speaker Change: I understand we understand I think Nick asked questions about <unk>.
Speaker Change: Gross margin.
Speaker Change: In the near term and we're looking at.
Speaker Change: 18, and a half.
Speaker Change: <unk>, which was at.
Speaker Change: Okay.
Speaker Change: To be like what you're shooting for.
Speaker Change: That sometimes willing to ballpark.
Speaker Change: Yes.
Speaker Change: Okay. Thank you.
Frank Pellegrino: And then your second query request. Yep, thanks. Increased inventory is probably driven by two or three main reasons. One, we have an increase in whip and finished goods. We will sell through that in Q4. As you saw with our volume, we had some soft volume with it back after a quarter. So that inventory was produced and we will sell through that inventory in the first couple months of Q4. And then the overall increase in inventory is mainly driven by a mix. The crops that we procure from the sellers, the walnuts and pecans, we saw an increase in acquisition costs.
Speaker Change: And then you are part of your question.
Speaker Change: Yes. Thanks.
Speaker Change: Inventory increased inventories by driven by two or three main reasons. One we have an increase in width and finished goods, we will sell through that in Q4.
Speaker Change: You saw where our volume we have some soft volume with the back half of a quarter. So that inventory was produced and now we sell through.
Speaker Change: Inventory in the first couple months of Q4.
Speaker Change: And then the overall increase in inventory is mainly driven by a mix now.
Speaker Change: The crops that we procure from the sellers the walnuts and pecans, we saw an increase in acquisition cost and that crop we maintain inventory for nine to 12 months until the next harvest. So that's driving the increase in inventory cost in value because of the crops that we don't turn.
Frank Pellegrino: And that crop, we maintain inventory for 9-12 months until the next harvest. So that's driving the increase in inventory costs and value. Because the crops that we don't turn in a month are increasing. Okay.
Speaker Change: <unk> are increasing.
Speaker Change: Okay.
Jeffrey Sanfilippo: Good, and any... Any thoughts on moving into You know, the, well, I guess the end. The larger quarters, the seasonally larger quarters, are actually, you know, Not necessarily imminent. So, um, but do you have any, um, like further updates on strategy going forward on, uh, outside of, like, what you've mentioned on CAPAC? And so strategically, we're actually working on holiday programs right now, just building up promotional programs, pricing, obviously, I mentioned, will be redone in June, July. And so really, the strategy is just to get through some of the volatility in the market, make sure that we have the right price points out there for consumers, the right product mix, where if things change and the economy changes dramatically, we've got the right products on the shelf that consumers can still buy.
Speaker Change: Great and any.
Speaker Change: Any thoughts on.
Speaker Change: Yes moving into.
Yes.
Speaker Change: Well I guess Ken.
Speaker Change: Yes, the larger quarters since seasonally larger quarters are actually.
Speaker Change: <unk>.
Speaker Change: Not necessarily eminent so.
Speaker Change: But do you have any further.
Speaker Change: Further updates on strategy going forward.
Speaker Change: Inside of like what you had mentioned on Capex.
Speaker Change: So strategically we're actually working on holiday programs right now just building up promotional programs pricing, obviously I mentioned will be re redone in June July and so really the strategy is just to get through some of the volatility in the market make sure that we have the right price right price points out there for consumers the right product mix, where if things.
Speaker Change: Change in the economy changes dramatically, we've got the right products on the shelf that consumers can still buy.
Jeffrey Sanfilippo: Strategically, the investment in the bar category is important. We're going to continue with that. We believe there's a lot of growth and white space in the bar category, especially for private label. And then M&A, obviously, always looking at it. Nothing has come up, but we're always in the... It's always part of our strategic plan to see where we can participate in other categories and apply our competitive advantage in differentiation and manufacturing to other categories.
Strategically the investment in the bar category is important we're going to continue with that we believe there is a lot of growth in white space in the bar category, especially for private label and then M&A, obviously always looking at it nothing has come up but we're always in the.
Speaker Change: It's always part of our strategic plan to see where we can participate in other categories and apply our competitive advantage and differentiation in manufacturing to other categories.
Okay. That's a good.
Ronald Mitterko: Okay, that's it. Good. Thanks. Thanks, Jeff. Thanks, Frank. Good luck.
Speaker Change: Thanks, well, thanks, Jeff and.
Speaker Change: Good luck thanks Ron.
Operator: For more information visit www.FEMA.gov Sorry for that.
Speaker Change: Good morning, Matt.
Speaker Change: Sorry for that.
Operator: That concludes our Q&A session for today.
Speaker Change: That concludes our Q&A session for today I will now turn the call I'll go back to Jeffrey Sanfilippo. Please go ahead.
Jeffrey Sanfilippo: I will now turn the call over back to Jeffrey Sanfilippo. Please go ahead. Thanks, Gail. So I appreciate everyone's participation on the call today. Thank you for the smart questions. These are volatile times and we know what to do. We know what needs to be done throughout our organization to continue to provide shareholder value and value for our customers. So appreciate your interest in JBSS, and have a great day.
Jeffrey Sanfilippo: Thanks, Gail so I appreciate everyone's participation on the call today. Thank you for this smart questions. These are volatile times and we know what to do we know what needs to be done throughout our organization to continue to provide shareholder value and value for our customers and consumers. So appreciate your interest in <unk> and have a great day.
Speaker Change: Okay.
Operator: Thank you everyone, that concludes today's call. You may now all disconnect. Have a nice day everyone. Thank you.
Speaker Change: Thank you everyone that concludes today's call you may now all disconnect have a nice day everyone.
Speaker Change: Thank you.
Operator: Please wait, the conference will begin shortly.
Speaker Change: Please wait the conference will begin shortly.
Speaker Change: Okay.
Speaker Change: Yes.
Speaker Change: Yes.
Speaker Change: Okay.