J. M. Smucker (NYSE:SJM) executives said the company is entering fiscal 2027 with momentum across key brands, while cautioning that commodity costs, tariffs and consumer behavior remain important variables in its outlook.
During the company’s fiscal fourth-quarter earnings question-and-answer session, Chief Executive Officer Mark Smucker said the company had “a great quarter and a solid outlook” for the new fiscal year. He pointed to what he described as a complementary portfolio spanning coffee, frozen handhelds and spreads, pet foods and sweet baked snacks.
Marshall said the outlook reflects the company’s current best estimate, while noting that geopolitical tensions in the Middle East could affect cost assumptions depending on their duration. He said Smucker expects to manage additional inflation through procurement, hedging, productivity savings and pricing “when and where appropriate.”
Coffee Deflation Expected to Support Profit Recovery
Coffee was a major focus of the call, as executives discussed the expected impact of lower green coffee costs. Smucker said the coffee category remains attractive and that the company continues to lead across segments and the value spectrum. He highlighted Café Bustelo as “a very significant growth brand” with more than $500 million in sales.
Smucker said the company expects profit improvement in coffee as the commodity environment moderates. However, he said the company is being prudent in forecasting volume response to lower prices because consumers remain cautious.
“Coffee is a pass-through category,” Smucker said, adding that the company passes costs through to customers and consumers “up and down” in a measured way. He said the company is currently focused more on trade spending, and that list price reductions would depend on when Smucker takes physical inventory of lower-cost coffee.
Marshall said the company expects its first quarter to be roughly flat from a net sales perspective, with green coffee deflation beginning to affect results more meaningfully in the second quarter and beyond. He also confirmed that the expected improvement in retail coffee margins into the high-20% range is largely a second-through-fourth-quarter event.
Uncrustables Remains a Growth Driver
Executives said the Uncrustables brand remains one of Smucker’s strongest growth platforms. Mark Smucker said the brand has reached $1 billion in sales and continues to benefit from its position in the frozen category, new formats, new occasions and innovation such as higher-protein morning offerings and “fridge-friendly” products.
Smucker said Uncrustables is not expected to continue growing at a double-digit rate, but the company still sees runway through distribution, household penetration, innovation and brand-building investments.
Marshall said Smucker expects mid-single-digit growth for Uncrustables in fiscal 2027, driven by volume and mix momentum and partially offset by strategic investments. He said roughly 75% of Uncrustables sales go through traditional U.S. retail, with the remaining 25% through away-from-home channels, where growth is expected to be slightly faster due to the smaller base and additional opportunities.
On the brand’s fridge-friendly format, Smucker said customer and consumer reception has been strong. He said all Uncrustables sandwiches are being transitioned to the fridge-friendly format, with the full portfolio expected to be converted around mid-summer.
Spreads, Pet and Sweet Baked Snacks Face Mixed Trends
Smucker said the company is seeing some pressure in spreads, but framed the frozen handheld and spreads segment as a broader “peanut butter and jelly story.” He said the company chose not to repeat some prior promotional activity and is not seeing unusual competitive behavior in the category.
In peanut butter, Smucker said recent softness was partly tied to weather events and stock-up activity, rather than structural category weakness. He said the company remains well positioned with leadership in stabilized peanut butter and several leading natural and organic peanut butter brands. He also cited the launch of Jif Simply, a limited-ingredient stabilized peanut butter product.
In pet, Marshall said the company continues to see volume momentum across Meow Mix and Milk-Bone, but segment profit is expected to be pressured by inflation and marketing investments.
For Sweet Baked Snacks, executives said the focus remains on stabilizing the Hostess business and improving profitability. Smucker said the company has strengthened the portfolio through SKU rationalization and noted that donuts grew 13% and now represent about 40% of the portfolio. He said the breakfast occasion for Hostess continues to perform well.
Smucker also said the company completed its manufacturing footprint consolidation and recovered more quickly than expected from a fire in the prior quarter. He said it will take time for the business to return to top-line growth.
Marshall said Sweet Baked Snacks segment profit is expected to rise about 30% year over year, helped by cost control, trade execution and a list price increase across parts of the donuts portfolio.
Marketing, Tariffs and Cost Savings
Marshall said Smucker remains committed to supporting its brands through marketing, with spending expected to be about 5.7% of net sales in the upcoming fiscal year. He said that represents an increase of about $30 million year over year and nearly $500 million in total spending, with investments expected to be fairly balanced throughout the year.
On tariffs, Marshall said Smucker experienced tariffs in fiscal 2026 and is assuming a 10% tariff level in its fiscal 2027 outlook. He said the company is pursuing refunds for previously paid tariffs, but the scope and timing remain uncertain, so no benefit has been included in guidance.
Marshall also discussed the company’s transformation office, saying Smucker targets gross cost savings equal to a couple points of revenue each fiscal year. He said future efforts will focus on supply chain areas he described as “buy, make, and move,” as well as the use of technology to improve the company’s cost structure.
Debt Reduction Remains a Priority
Marshall said Smucker generated $1.2 billion in free cash flow in fiscal 2026, allowing the company to repay more than $700 million of debt and pay just over $450 million in dividends. For fiscal 2027, he said the company remains committed to generating at least $1 billion in free cash flow, with capital expenditures expected to be roughly flat at $325 million.
The company plans to pay down an additional $500 million of debt, which Marshall said would support reducing leverage to around 3 times by the end of the fiscal year, down from about 3.8 times at the end of fiscal 2026.
Marshall said that as Smucker approaches its leverage objectives, it could consider additional cash deployment options, including potential share repurchases. However, he noted that the company’s current guidance does not include share repurchases.
In closing remarks, Mark Smucker said the company’s priorities are driving focused organic volume growth, improving profitability and earnings growth, and maintaining discipline in capital deployment.
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.
