J.M. Smucker Q2 FY24 pet food sales affected by sale of brands
J.M. Smucker’s U.S. retail pet food net sales in the second quarter of fiscal year 2024 declined by US$301.2 million (39%) to US$464 million, reflecting the company’s divestiture of several pet food brands. Earlier in 2023, J.M. Smucker sold several pet food brands to Post Holdings, a consumer-packaged goods holding company headquartered in St. Louis, Missouri, USA. The transaction included the Rachael Ray Nutrish, 9Lives, Kibbles ‘n Bits, Nature’s Recipe and Gravy Train brands as well as Smucker’s private-label pet food business. However, when the effects of the sale were excluded, Smucker’s pet segment net sales increased US$76.6 million (20%) in Q2 FY24 compared to the same period in the previous fiscal year.
“U.S. Retail Pet Foods segment profit decreased 19%, primarily reflecting the noncomparable segment profit in the prior year related to the divested pet food brands,” Tucker Marshall, Smucker chief financial officer, said in a press release. “Excluding the impact of the divestiture, segment profit increased a low double-digit percentage, primarily driven by a favorable net impact of higher net price realization and increased costs and favorable volume/mix, partially offset by increased distribution costs.”
Smucker pet segment profit
Smucker’s pet segment profit was US$97.2 in Q2FY24, a 19% decline of US$22.9 million related to the sale of those various brands. Excluding the impact of the divestiture, segment profit increased, primarily driven by a favorable net impact of higher net price realization and increased costs and favorable volume/mix, partially offset by increased distribution costs. Higher net price realization increased net sales by 8 percentage points, primarily reflecting list price increases across the portfolio. Volume/mix increased net sales by 12 percentage points, primarily driven by US$38.4 million of contract manufacturing sales related to the divestiture and growth for dog snacks, primarily driven by the Milk-Bone brand.
“In pet foods, comparable net sales increased 20% versus the prior year, including a 10% benefit from contract manufacturing sales related to the divested pet food brands, and strong growth for Meow Mix cat food and Milk-Bone dog snacks,” Aaron Broholm, J.M. Smucker vice president of investor relations, said in a press release. “In dog snacks, Milk-Bone brand net sales grew 10%, driven by volume/mix. The brand also continued to outpace the category, as consumer take-away grew over 2x the category rate. The brand has also grown its dollar share for nine consecutive quarters, with growth driven by core offerings and premium-positioned innovation. Meow Mix brand net sales grew 14%, and demand continued to exceed our production capacity for dry cat food in the quarter. Recent production constraints have moderated, and we expect double-digit net sales growth for Meow Mix in the second half of the fiscal year. Our pet segment results this quarter highlight the benefits of our recent pet food divestiture, as profit margins improved over the prior year, driven by product mix. We anticipate margins will further improve over time after we fulfill contract manufacturing requirements and remove stranded overhead costs related to the divestiture.