The J. M. Smucker Company Q2 FY2026 earnings call

• Sweet Baked Snacks: Pleased with progress, seeing sequential improvement in c-store, volume shares improving, focus on focused portfolio with SKU rationalization (eliminating 25% of SKUs), relaunch of SuzyQs, streamlining operations, and Indianapolis closure to complete by fourth quarter. • Pet: Committed to marketing for growth, with 'More Dog' campaign for Milk Bone, innovation like peanut buttery bites and upcoming launches, and expectation of low single-digit growth in pet portfolio for third and fourth quarters. • Coffee: Achieved 18.2% segment profit margin in Q2, anticipates margin improvement in later quarters with tariff impact considerations. • SG&A: Sharpened pencil on SG&A spend, marketing absolute dollars up year over year, with marketing expected to be 5.5% of net sales. • Innovation: Pace of innovation accelerated across portfolios, including in Hostess, pet, and Uncrustables, with examples like Uncrustables' new flavors and protein items.

Sweet Baked Snacks: Organic sales showed improvement with sequential progress, especially in c-store with volume shares increasing. SKU rationalization (eliminating 25% of SKUs) has helped, and the portfolio focus is beneficial. Expectations for the second half include Q3 being flat to slightly down on a comparable basis and Q4 showing low single-digit growth. Revenue contribution details not explicitly provided in absolute terms but focus on growth and improvement efforts. Pet: Dog treats category is improving, with Milk Bone expected to get back to growth driven by marketing campaigns like 'More Dog' and innovation. Meow Mix growth is expected to continue. Revenue contribution details not explicitly provided in absolute terms but focus on growth in the category. Frozen Handheld and Spreads: Net sales expectation reduced, with spreads challenged in the second quarter and the balance expected in the back half. Uncrustables is on track to be a billion-dollar brand with low double-digit growth anticipated in the third and fourth quarters due to marketing, innovation, and distribution support. Coffee: Second-quarter segment profit margin was 18.2%, with anticipation of slight improvement in Q3 (not surpassing 20%) and moving beyond 20% in Q4, though with lingering tariff impact. Revenue contribution details not explicitly provided in absolute terms but focus on margin and growth expectations.

• Tariff Impact: $0.50 tariff impact in FY 2026 with absorption of about $75 million tariff-related costs in Q3, serving as a tailwind to FY 2027. • Sweet Baked Snacks: Q3 expected to be flat to slightly down on a comparable basis, Q4 expected to have low single-digit growth. • Pet: Low single-digit growth anticipated for the pet portfolio in the third and fourth quarters. • Coffee: Anticipated margin improvement in later quarters with some lingering tariff impact. • FY 2026: Midpoint EPS expectation at $9, with $975 million free cash flow generation expected to support debt pay down. • FY 2027: Anticipated step down in net debt to EBITDA ratio toward 3 times, with detailed outlook to be provided in the fourth-quarter call.

Q: About the sustainability of sweet baked goods organic sales improvement, A: Mark Smucker said the plan in place is working, with decisive actions showing progress and expecting acceleration in the next couple of quarters.

Q: How much of the $0.50 tariff impact is specifically coffee-related and its effect on FY 2027, A: Tucker Marshall said the predominance of the $0.50 tariff impact is related to green coffee tariffs, and it should be a tailwind to FY 2027.

Q: Quantify the impact of not taking the third round of pricing on the outlook, A: Tucker Marshall said added back the $0.50 impact from the first quarter earnings call, and will absorb about $75 million of tariff-related costs in the third quarter.

Q: Regarding the SG&A guidance reduction, A: Tucker Marshall said marketing absolute dollars will be up year over year, and SG&A spend has been sharpened across the network.

Q: About the profit results in Sweet Baked Snacks, A: Tucker Marshall said top line exceeded expectations in Q2, but bottom line didn't meet expectations, with expectation of better performance in the third and fourth quarters.

Q: On the petrete category dog treats, A: Mark Smucker said expecting a strong lap, especially in the third quarter, with Milk Bone to get back to growth due to marketing efforts like 'More Dog' campaign and innovation.

Q: Concerning the reduced net sales expectation in frozen handheld and spreads, A: Tucker Marshall said about half of the reduced net sales expectation came in the second quarter, with the balance in the back half, and Uncrustables still on track to be a billion-dollar brand.

Q: Pacing of coffee margins in Q3 and Q4, A: Tucker Marshall said slight improvement in Q3's segment profit margin not surpassing 20%, and moving beyond 20% in Q4, though with lingering tariff impact.

Q: Tariff impact in FY 2027, A: Tucker Marshall said it should benefit the bottom line as a tailwind.

Q: Coffee elasticity, A: Tucker Marshall said current coffee portfolio outlook is 16% year-over-year growth with 22% pricing offset by 6% down volume mix, improving from previous elasticity assumptions.

Q: Uncrustables sequential acceleration, A: Tucker Marshall said anticipate low double-digit growth in the third and fourth quarters, supported by marketing, innovation, and distribution.

Q: Coffee brand performance variation, A: Mark Smucker said strong performance on Bustelo and Folgers, with Dunkin' seeing improvement but facing competitive pricing pressure.

Q: Uncrustables volume decline explanation, A: Mark Smucker said largely due to lapping strong Q2 last year, with merchandising support to continue for acceleration.

Q: Tariff impact confirmation, A: Tucker Marshall said the $75 million tariff expense in FY 2026 is entirely due to coffee tariffs.

Q: On innovation pace, A: Mark Smucker said the pace of innovation has accelerated across portfolios, including in Hostess, pet, and Uncrustables.

Q: Leverage outlook, A: Tucker Marshall said $975 million free cash flow in FY 2026 to support debt pay down, with anticipation of stepping down net debt to EBITDA ratio to 3 times in FY 2027.

Q: Competitor price reduction and portfolio value, A: Mark Smucker said the portfolio offers value across the spectrum, and would pass along deflation if seen in coffee.

Q: FY 2027 EPS growth expectation, A: Tucker Marshall said it's early to provide the FY 2027 outlook but tariff relief and business momentum provide potential tailwind, with detailed outlook in fourth-quarter call.