Smucker’s CEO: ‘lowered guidance is due to inflation and supply chain disruptions’

J.M. Smucker Co. (NYSE: SJM) reported market-beating results for its fiscal first quarter on Thursday. Investors, however, focused on slashed profit guidance for the full-year, leading to an about 4.0% decline in the stock this morning.

Highlights from CEO Smucker’s interview with CNBC’s “Squawk Box”

CEO Mark Smucker blames inflation and supply chain disruptions for lowered earnings guidance. On CNBC’s “Squawk Box”, he said:

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“The change in guidance is related to inflation and supply chain disruptions. We are managing these challenges; we’ve already moved our pricing a bit, working with our retail customers. We will continue to work with our customers to raise prices over the next several months to recover those costs. Although, it could take a bit longer than we’d have expected.”

Smucker attributes higher costs and supply chain issues to the ongoing Coronavirus pandemic. Some weather events, he added, also contributed to fuelling costs of commodities. He expects inflation to remain a factor at least through 2022 spring.  

Commenting further on the J.M. Smucker’s approach towards the delta variant of the Coronavirus, the chief executive said:

“We recently brought back our masked mandate here in the office. We continue to encourage and educate our employees to get the vaccine, we are monitoring it daily, but have not issued a mandate at this point.”

Financial performance

J.M. Smucker reported $153.9 million ($1.42 per share) of net income versus the year-ago figure of $273 million ($2.08 per share). Adjusted for one-time items, it earned $1.90 a share on $1.86 billion in sales, representing a 5.8% annualised growth.

According to FactSet, experts had forecast $1.89 of adjusted EPS on $1.80 billion in sales. The Ohio-based company’s gross margin tanked to 34.4% in Q1 from 39.3% on a 1.9% increase in cost of products sold.

Future guidance

For the full-year, J.M. Smucker now forecasts an up to 2.5% decline in sales and $8.25 to $8.65 of adjusted EPS. In its previous guidance, it had expected an up to a 3.0% sales decline and $8.70 to $9.10 of adjusted EPS.

The earnings guidance is weaker than the FactSet consensus of $8.89 a share as the company expects margin to slide to 36% this year from 39.2%, as per the earnings press release.