Executives from J. M. Smucker (NYSE:SJM) used the company’s fiscal 2026 third-quarter earnings Q&A session to address investor questions ranging from activist engagement and portfolio priorities to ongoing challenges in its Sweet Baked Snacks business and expectations for coffee profitability.
Engagement with Elliott and governance additions
CEO Mark Smucker said the company’s engagement with Elliott is “recent” and has been “very constructive,” adding that there is “good alignment” on priorities. He said discussions have centered on continuing operating improvements aimed at “profit restoration over time,” continued portfolio management, near-term emphasis on organic growth, disciplined capital allocation, and governance.
Sweet Baked Snacks: stabilization efforts, operational costs, and outlook constraints
Much of the Q&A focused on the Sweet Baked Snacks portfolio, including the Hostess brand. Management reiterated that near-term efforts are focused on stabilizing the business and returning it to growth over time, including SKU rationalization and a tighter focus on “icon brands” such as CupCakes, Twinkies, and Donettes.
In response to questions about the trajectory into fiscal 2027, CFO Tucker Marshall said it is “early” to provide an outlook for fiscal 2027. He noted the company expects the fourth quarter to be “a softer quarter” for the portfolio due to category trends and as the business overcomes a temporary disruption associated with a plant or manufacturing fire. Later, Marshall referenced top-line softness tied to the Emporia, Kansas, fire, which he said was muting some of the quarter’s savings from a bottom-line standpoint.
Marshall also addressed why expectations for sequential improvement did not materialize as previously anticipated, saying third-quarter top-line results came in below expectations “largely due to category trends” and “some of our own execution.” He added that bakery network costs were “much higher than we anticipated,” which weighed on profit expectations. He said the fourth quarter “should be better,” but would absorb the impact of the February fire “both at top line and bottom line.”
When asked about talent turnover at Hostess, Smucker said he is “very confident” the company has the right team in place, describing them as “some of the best and brightest.” He emphasized that the company has been navigating category dynamics and operational challenges, and said the Indianapolis facility closure was “more costly than we had anticipated” but is “largely behind us.”
On promotions and reported organic sales relative to consumption, Marshall said the company saw timing effects around operational efficiencies as it reset the bakery network and also “reset promotional activity in the back half,” pulling promotions “largely in support of then putting it back in” to improve efficiency of spending. He added that the company expects to “begin to build back profitability” given the business is at “such a low watermark.”
Pressed on what a “normalized” Sweet Baked Snacks margin could look like, Marshall said profitability is below expectations—particularly in the third quarter—and that the company expects improvement in the fourth quarter. He said the company would be better positioned to lay out the profit trajectory and potentially “a revised profit margin target” on the fourth-quarter earnings call.
Coffee: deflation tailwinds, tariffs rollover, and pricing uncertainty
Management expressed optimism about the outlook for its coffee portfolio, citing category resilience and brand performance. Marshall said the company does not disclose its hedging or cost position, but does hedge “for flexibility to support annual profit delivery.” He reiterated comments made previously that green coffee cost deflation benefits both “absolute profit dollar” and profit margin percentage, and noted the company will be “lapping the impact of tariffs.”
Marshall said that in the fourth quarter of fiscal 2026, the company expects a “mid-20s” segment profit margin in coffee.
On tariff impacts, Marshall reiterated the company had called out a “$75 million unmitigated tariff impact” affecting the current fiscal year that would be lapped next fiscal year, suggesting it can be “add[ed] back to exit segment profit for this fiscal year” when thinking about next year’s comparison. He also said elasticities were “better than anticipated” in the third quarter, though the company is maintaining a “prudent approach” to forecasting elasticities in the fourth quarter.
When asked about potential differences in pricing actions between roast-and-ground coffee and single-serve pods as costs come down, Marshall said it is “early” to discuss the magnitude of deflation and its implications for pricing. He noted roast-and-ground coffee represents a greater share of coffee content than a single-serve K-Cup, and said the company will continue to navigate how it addresses deflation across the portfolio. Smucker added that profitability and margins across the coffee portfolio are “generally similar.”
On retail inventory dynamics in pods raised by a peer company, Smucker said the company has not seen “any abnormalities” in coffee inventories, adding that the coffee business continues to perform well and delivered “great growth” for Café Bustelo.
Capital allocation and leverage goals
On portfolio reshaping and the use of potential divestiture proceeds, management reiterated that the company continually reviews its portfolio and values its diversity across pet, coffee, food, and snacking. Marshall said proceeds from divestitures have historically been used to pay down debt or repurchase shares.
Marshall also said the company remains on a path to reach “3x leverage or below by the end of next fiscal year,” which he said would enable an opportunity to consider share repurchases again.
Pet and Uncrustables: performance updates and innovation focus
Smucker said he was “very pleased” with pet performance. He highlighted Meow Mix’s continued growth trajectory and said it remained the “number one leader in dry,” supported by innovation such as the Gravy Bursts platform, which the company is expanding with new items. He also said Milk-Bone returned to growth, supported by base biscuits and innovation including the Peanut Buttery Bites platform.
However, Smucker said parts of the dog snacks portfolio—Pup-Peroni and Canine Carry Outs—remain soft, citing competition and private label. He said the company has begun a brand refresh for Pup-Peroni and continues marketing investment, while emphasizing Milk-Bone as a central focus for growth.
On dog snacks category trends more broadly, Smucker said the category has continued to grow, driven by humanization and premiumization, while also noting strength in more value-oriented base biscuits.
On Uncrustables, Smucker said the company continues to feel “great” about the business as a key growth driver. He cited distribution gains in away-from-home and convenience channels, noting the company has tripled C-store sales and added approximately 3.5 million new households. He also said growth in traditional U.S. retail has been supported by increased freezer space, marketing, and innovation, adding that in mature channels the “continued growth is going to be driven largely by innovation,” including new high-protein sandwiches.
In closing remarks, management said the company remains focused on advancing its long-term growth strategy, improving profitability and earnings growth, and maintaining disciplined capital deployment, while taking deliberate actions to support these objectives.
About J. M. Smucker (NYSE:SJM)
The J. M. Smucker Company is a diversified food and beverage manufacturer and marketer known for a portfolio of well-established consumer brands. The company’s main business activities include the production and distribution of fruit spreads, peanut butter, coffee and coffee filters, as well as pet food and pet snacks. Smucker’s core product lines serve both retail and foodservice customers through grocery chains, mass merchandisers, club stores, convenience outlets and e-commerce channels.
Among its leading brands are Smucker’s® fruit spreads, Jif® peanut butter, Folgers® and Dunkin’® coffees, and Café Bustelo® coffee.
