EPS of $1.72 increased by 49.1% from previous year
Gross margin of 21.4%
Net income of 20.15M
"I am encouraged to share the positive results and improvements we've made in our financial performance this quarter. Although we saw a decrease in sales volume during the third quarter, we improved our gross profit and achieved a 50% increase in diluted earnings per share." - Jeffrey Sanfilippo
John B. Sanfilippo & Son Inc (JBSS) Q3 2025 Earnings Analysis: Moderate Top-line Decline Amid Margin Expansion, Strategic Capex to Expand Domestic Production
Executive Summary
JBSS delivered a modest revenue decline in Q3 2025, with net sales of $260.9 million, down 4% year over year (YoY) on a 7.9% drop in pounds sold, partially offset by a 4.2% rise in the weighted average price per pound. Despite softer volume, gross profit rose 13.7% to $55.9 million, lifting gross margin to 21.4% from 18.1% a year ago, aided by inventory valuation adjustments tied to a higher-cost crop year for walnuts and pecans as well as manufacturing efficiencies. Net income rose 49% YoY to $20.2 million and diluted EPS increased approximately 50% to $1.72, reflecting cost discipline and strategic pricing in an inflationary environment. Management cautioned about macro headwinds, including higher commodity costs and tariff exposure, but signaled a proactive stance to protect profitability through price discipline, product mix optimization, and selective form changes.
Year-to-date performance reinforces the same dynamics: net sales for the first three quarters of fiscal 2025 were $838.2 million (up 5.1% on a reported basis; up modestly excluding the Lakeville acquisition), with gross margin easing from 20.6% to 18.5% due to higher nut input costs and competitive pricing pressures. The company expects to invest roughly $90 million in equipment to expand domestic production capabilities and related infrastructure by end-2026, targeting meaningful long-term capacity, efficiency, and cost benefits. While near-term free cash flow remains negative (free cash flow to the period was -$37.6 million; operating cash flow was -$25.9 million), JBSS maintains a solid balance sheet with total liabilities of $243.4 million and stockholders’ equity of $346.6 million, and a debt profile that remains manageable given current EBITDA capacity and a robust interest-coverage profile (~26.7x).
Overall, the QQ3 2025 results underscore a company navigating elevated commodity costs and tariff headwinds while pursuing a strategic growth plan centered on capacity expansion, brand and private-label strengths, and a disciplined approach to pricing and cost management. The investment thesis hinges on sustained margin resilience, execution of the long-range plan, and the ability to pass through higher costs to customers where feasible, supported by elevating bar-category growth and domestic manufacturing competitiveness.
Key Performance Indicators
Revenue
260.91M
QoQ: -13.34% | YoY:-4.04%
Gross Profit
55.89M
21.42% margin
QoQ: 6.97% | YoY:14.54%
Operating Income
28.20M
QoQ: 45.58% | YoY:52.47%
Net Income
20.15M
QoQ: 48.24% | YoY:49.54%
EPS
1.73
QoQ: 47.86% | YoY:49.14%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $260.9 million, down 4.0% YoY; QoQ: -13.3%
Gross profit: $55.9 million, up 13.7% YoY; gross margin: 21.42% (vs 18.12% in 3Q24)
Operating income: $28.2 million, up 52.5% YoY; margin 10.81%
Net income: $20.2 million, up 49.5% YoY; net margin 7.72%
Diluted EPS: $1.72 (YoY +49.1%, QoQ +47.9%)
Financial Highlights
Revenue and profitability metrics (3Q25 vs 3Q24):
- Revenue: $260.9 million, down 4.0% YoY; QoQ: -13.3%
- Gross profit: $55.9 million, up 13.7% YoY; gross margin: 21.42% (vs 18.12% in 3Q24)
- Operating income: $28.2 million, up 52.5% YoY; margin 10.81%
- Net income: $20.2 million, up 49.5% YoY; net margin 7.72%
- Diluted EPS: $1.72 (YoY +49.1%, QoQ +47.9%)
YTD (first three quarters of fiscal 2025):
- Net sales: $838.2 million (up 5.1% YoY; flat to modestly higher excluding Lakeville impact)
- Gross margin: 18.5% (down from 20.6% prior year)
- Net income: $45.4 million; Diluted EPS: $3.87
- Free cash flow: -$37.6 million; cash flow from operating activities: -$25.9 million
- Inventory on hand: +$47.1 million (22.4% YoY); raw nut/dried fruit cost per pound up 33.9% YoY
Liquidity and capital: current ratio 2.01, quick ratio 0.53, cash ratio 0.007, total debt $122.4 million, net debt $121.1 million, cash at period end $1.30 million.
Strategic spend: approximately $90 million planned for equipment to expand domestic production and related infrastructure by end-2026, with a focus on bar capabilities and supporting broader production capacity.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
260.91M
-4.04%
-13.34%
Gross Profit
55.89M
14.54%
6.97%
Operating Income
28.20M
52.47%
45.58%
Net Income
20.15M
49.54%
48.24%
EPS
1.73
49.14%
47.86%
Key Financial Ratios
currentRatio
2.01
grossProfitMargin
21.4%
operatingProfitMargin
10.8%
netProfitMargin
7.72%
returnOnAssets
3.42%
returnOnEquity
5.81%
debtEquityRatio
0.35
operatingCashFlowPerShare
$-2.22
freeCashFlowPerShare
$-3.22
priceToBookRatio
2.39
priceEarningsRatio
10.28
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Management emphasized navigating a challenging macro environment while investing in growth and maintaining price discipline:
- Strategy and capital allocation: JBSS plans to deploy roughly $90 million in capex to expand domestic production capabilities and related infrastructure by fiscal 2026, a signal of confidence in U.S. manufacturing and capacity expansion.
- Tariffs and cost pass-through: The company is actively engaging customers to pass through higher tariff costs on key items (cashews, pepitas, pine nuts, macadamias) where feasible, while seeking alternatives to mitigate supply-chain disruption and manage inventories. Management acknowledges tariff exposure of 15%–20% of raw material purchases and notes potential demand destruction if price increases are not absorbed.
- Commodity headwinds and pricing: Elevated nut costs and cocoa prices are driving higher average selling prices; management sees a potential moderation in commodity costs if demand softens. They are leveraging a robust consumer insights function to optimize pricing and product mix.
- Category and channel dynamics: Private-label growth and bar-category investments are highlighted as growth levers, with Orchard Valley Harvest witnessing volatility due to delayed orders and inventory changes at major retailers. The contract manufacturing channel is expanding driven by granola processing at Lakeville, while branded volumes faced broad declines.
- Inventory and working capital: An elevated inventory position, driven by higher cost crops and mix (walnuts/pecans) with a 9–12 month procurement cycle, indicates working capital intensity that contributed to negative free cash flow.
I am encouraged to share the positive results and improvements we've made in our financial performance this quarter. Although we saw a decrease in sales volume during the third quarter, we improved our gross profit and achieved a 50% increase in diluted earnings per share.
— Jeffrey Sanfilippo
The investments we are making demonstrate our commitment to growing our business, being a more valued partner to our customers, and providing more job opportunities for the dedicated team members throughout our organization.
— Jeffrey Sanfilippo
Forward Guidance
Outlook based on management commentary and current industry dynamics:
- Tariff environment remains a key risk; JBSS expects to manage through price realignment with customers and, where necessary, product/formulation adjustments to offset cost pressures. The firm plans to monitor the tariff impact on finished goods and adjust procurement strategies accordingly.
- Capex-driven growth: The $90 million capex program targets incremental capacity, particularly in the bar and broader production platforms, with an expected payback aligned to the company’s 10% hurdle rate for incremental investments.
- Margin trajectory: Near-term gross margin benefited from inventory valuation adjustments in 3Q25; excluding IVA effects, the gross margin trajectory will depend on commodity costs and pricing realization. The company targets mid-to-high teens gross margins on a normalized basis and continues to drive manufacturing efficiencies.
- Revenue mix and demand: JBSS highlighted continued volatility in consumer demand and per-unit pricing; ongoing efforts to expand distribution, innovate with product formats, and strengthen private-label position are critical to offset volume softness in certain channels.
- Key monitoring metrics for investors: commodity input costs by major nuts (almonds, walnuts, pecans, cashews), tariff pass-through progress, inventory turns and working capital, capex realization, and the bar-category expansion milestones. Investors should watch for progress on price realization, product mix shifts (private label vs branded), and any M&A developments that may augment the growth profile.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
JBSS Focus
21.42%
10.80%
5.81%
10.28%
BRID
20.50%
-7.66%
-1.35%
-10.54%
CVGW
10.20%
4.84%
4.24%
13.41%
IPAR
63.90%
25.00%
12.90%
10.32%
JJSF
33.00%
13.30%
4.56%
12.29%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
JBSS enters a period of strategic capex and margin management amid a volatile macro environment. The projected $90 million capex to expand domestic production signals a secular push toward greater supply chain resilience and capacity, particularly in the bar category, which could drive higher-margin growth if execution meets expectations. The ability to pass through tariff and commodity-cost increases to customers will be a critical determinant of near-term profitability; management has indicated active customer dialogue and pricing adjustments, but market response will depend on competitors’ pricing actions and consumer price sensitivity. The company’s leverage to private-label growth and distribution expansion offers upside potential, supported by a diversified brand portfolio and a disciplined approach to cost control. However, negative free cash flow and inventory-driven working capital pressures warrant cautious near-term liquidity assessment, especially if macro conditions deteriorate or tariff costs intensify. Overall, the investment thesis rests on successful capex deployment, favorable pricing realization, and continued operating leverage from manufacturing efficiency gains, with key monitoring factors including tariff impact, commodity cost trajectory, inventory management, and progress on the long-range growth plan.
Key Investment Factors
Growth Potential
Growth potential centers on capex-driven capacity expansion (notably bar production and domestic manufacturing), continued private-label penetration, and the expansion of distribution through new grocery-channel partners and club/e-commerce channels. The bar category investments could unlock white-space growth and higher-margin private-label opportunities, provided pricing and cost pressures are managed.
Profitability Risk
Key risks include sustained tariff impacts on multiple nut categories (e.g., cashews, pepitas, pine nuts, macadamias), volatility in commodity prices, and potential demand destruction if price increases pass through to consumers. Inventory build-up and negative free cash flow reflect working capital intensity and macro headwinds, which could pressure liquidity if demand deteriorates further. Competitive dynamics in snack nuts and the performance of Orchard Valley Harvest against promoted categories remain uncertainty drivers.
Financial Position
Solid balance sheet with total liabilities of $243.4 million and stockholders’ equity of $346.6 million; debt level remains moderate with total debt of $122.4 million and net debt of $121.1 million. Liquidity metrics show a strong current ratio (2.01) but a very low cash ratio (0.00744), highlighting reliance on working capital and efficient inventory management. Cash flow from operations was negative in the quarter (-$25.9 million) and free cash flow was negative (-$37.6 million), primarily due to working capital movements and seasonality. The company maintains a prudent beta for capital allocation, with a stated hurdle rate of 10% for incremental capex.
SWOT Analysis
Strengths
Diversified brand portfolio across Fisher, Orchard Valley Harvest, and Southern Style Nuts with a presence in retail, private-label, and contract manufacturing.
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