By Micah Maidenberg
J.M. Smucker Co. reported weaker sales in its latest quarter, as the food manufacturer passed along to retailers savings from lower costs for raw materials such as coffee beans and peanuts.
The Orrville, Ohio-based company also faced heightened competition in its pet-food business and said its Rachael Ray Nutrish pet-food brand underperformed expectations in the quarter, which ended July 31.
Shares of the company fell more than 8% on Tuesday after it said that net sales declined 6% to $1.78 billion, missing the consensus estimate of $1.87 billion, according to FactSet. Smucker also lowered its sales forecast for the rest of its current fiscal year.
Smucker's struggles in the quarter stand in contrast to a number of its peers. Companies including Oreo-maker Mondelez International Inc. and Kellogg Co. have bolstered results and offset rising costs by persuading retailers in the U.S. and Canada to pay higher prices for their products.
Yet Chief Executive Mark Smucker said in an interview that the company is charging retailers less for some of its products because of falling prices for commodities it relies on heavily.
"It is an issue of deflation. Peanut costs and coffee costs, from a commodities perspective, are at some of the lowest prices that they've been in decades. We're reflecting that," he said. The company is focused on boosting sales of coffee products and peanut butters by spending on marketing, Mr. Smucker added.
The company said the prices it charges retailers declined 3% in its coffee business amid what Smucker said were significantly lower costs for green-coffee beans it uses in brands such as Folgers and Cafe Bustelo. This spring, prices for arabica beans hit their lowest price in more than a decade.
Smucker also said that prices dropped 4% in its consumer-foods business, driven lower by a cut in what it charges retailers for its Jif peanut butter. The company has said it cut the price because of competition, including from retailers' store brands, and because of lower peanut prices.
The company's pet-food business faced significant competition in the quarter, as other pet-food makers lowered prices for higher-end products to draw in consumers.
"We did not fully anticipate how broad and aggressive some of the pricing actions would be on trial sizes," for premium dog-food products, Mr. Smucker said on a conference call.
Smucker has bet big on pet food, purchasing last year the producer of the Nutrish pet-food brand for $1.7 billion. But General Mills Inc., which bought the maker of Blue Buffalo pet food in a deal also completed last year, has been expanding distribution of those products.
The Nutrish brand underperformed expectations in the latest quarter, executives said. The company now plans to tweak its offers on Nutrish products and support it with advertising.
The food company on Tuesday also lowered its forecast for its current fiscal year. It now expects net sales for the year to be flat or fall 1% compared with the prior year. Previously, Smucker predicted sales would rise between 1% and 2%.
The company reported a profit of $154.6 million, or $1.36 a share, for the quarter that ended July 31, compared with $133 million, or $1.17 a share, a year earlier.
After adjustments, Smucker's profit of $1.58 a share fell short of expectations of $1.74 a share.
Write to Micah Maidenberg at firstname.lastname@example.org