EPS of $-6.21 decreased by 645.6% from previous year
Gross margin of 40.2%
Net income of -662.30M
"Net sales for the quarter would have been above our expectations, however, we experienced certain supply chain disruptions that negatively impacted our results, which I am pleased to say have been resolved." - Mark Smucker
The J M Smucker Company (SJM) QQ3 2025 Earnings Review: Supply-Chain Resolution, Hostess Integration Progress, and Brand-Locused Growth in Packaged Foods
Executive Summary
The J M Smucker Company reported Q3 FY2025 results that reflected a mix of brand momentum on a multi-brand platform and near-term headwinds from supply-chain disruptions and impairment charges. Net sales declined 2% year-over-year to $2.186 billion, while adjusted earnings per share (EPS) rose 5% to $2.61, driven by favorable price realization and cost discipline. However, GAAP net income was negative at $662.3 million primarily due to non-cash impairment charges of $794 million related to the Sweet Baked Snacks goodwill and $208 million related to the Hostess trademark, underscoring the legacy-portfolio deterioration in the near term. Management guided to a higher full-year adjusted EPS midpoint (roughly $9.85–$10.15) and raised free cash flow to about $925 million, supported by expected Hostess synergies and ongoing cost-management initiatives. The company reaffirmed a strategic tilt toward high-growth platforms (Uncrustables, Caf e9 Bustelo, Milk-Bone, Meow Mix) while continuing to optimize the Hostess portfolio and pursuing revenue synergies across channels, including expansion into convenience and C-store."
Key Performance Indicators
Revenue
2.19B
QoQ: -3.75% | YoY:-1.94%
Gross Profit
878.10M
40.17% margin
QoQ: -0.90% | YoY:6.68%
Operating Income
-594.00M
QoQ: -450.03% | YoY:-299.73%
Net Income
-662.30M
QoQ: -2 603.27% | YoY:-650.08%
EPS
-6.22
QoQ: -2 604.35% | YoY:-645.61%
Revenue Trend
Margin Analysis
Key Insights
Revenue: $2.186 billion in Q3 2025; YoY decline of 1.94%, QoQ decline of 3.75% (per incomeMetrics).
Gross Profit: $878.1 million; gross margin 40.17%; YoY gain of 6.68%, QoQ decline of 0.90%.
Operating Income: -$594 million; operating margin -27.17%; YoY change of -299.73%, QoQ change of -450.03%.
Net Income: -$662.3 million; net margin -30.30%; YoY change of -650.08%, QoQ change of -2603.27%.
Adjusted EPS: $2.61, up 5% YoY; guidance raised for full year to a midpoint of $10.00 (from prior).
Financial Highlights
- Revenue: $2.186 billion in Q3 2025; YoY decline of 1.94%, QoQ decline of 3.75% (per incomeMetrics).
- Gross Profit: $878.1 million; gross margin 40.17%; YoY gain of 6.68%, QoQ decline of 0.90%.
- Operating Income: -$594 million; operating margin -27.17%; YoY change of -299.73%, QoQ change of -450.03%.
- Net Income: -$662.3 million; net margin -30.30%; YoY change of -650.08%, QoQ change of -2603.27%.
- Adjusted EPS: $2.61, up 5% YoY; guidance raised for full year to a midpoint of $10.00 (from prior).
- Free Cash Flow (TTM): $1.0 billion? (per EBITDA context trailing EBITDA approx. $2.2B and FCF YTD $151M in Q3); Net debt: ~$7.889B; Leverage: ~3.6x.
- Balance sheet: Cash $47.2M; total debt $7.937B; cash balance and modest cash-to-debt ratio highlight leverage concerns amid impairment charges.
- Segment highlights: Coffee +2% net sales; Uncrustables up double-digits; Milk-Bone strong innovation; Hostess-related impairment charges weigh on GAAP results; Near-term volatility in pet foods and sweet baked snacks.
- Outlook: Net sales expected to rise ~7.25% for the full year; adjusted gross margin ~38%; SG&A up ~8%; Capex ~$400M; FCF ~$925M; EPS range $9.85–$10.15.
Income Statement
Metric
Value
YoY Change
QoQ Change
Revenue
2.19B
-1.94%
-3.75%
Gross Profit
878.10M
6.68%
-0.90%
Operating Income
-594.00M
-299.73%
-450.03%
Net Income
-662.30M
-650.08%
-2 603.27%
EPS
-6.22
-645.61%
-2 604.35%
Key Financial Ratios
currentRatio
0.6
grossProfitMargin
40.2%
operatingProfitMargin
-27.2%
netProfitMargin
-30.3%
returnOnAssets
-3.59%
returnOnEquity
-9.59%
debtEquityRatio
1.15
operatingCashFlowPerShare
$2.25
freeCashFlowPerShare
$1.42
dividendPayoutRatio
-17.3%
priceToBookRatio
1.65
priceEarningsRatio
-4.29
Net Income vs. Revenue
Expense Breakdown
Management Commentary
Key management takeaways from the QQ3 2025 earnings call, grouped by theme:
- Strategy and growth platforms: Mark Smucker highlighted Uncrustables net sales up 15% in the quarter, with the brand on track to exceed $900 million in annual net sales, aided by national advertising, distribution gains, and new merchandising. Caf e9 Bustelo also grew 15% with expansion into new roast profiles, ready-to-drink, and cold coffee formats; Milk-Bone and Meow Mix delivered continued volume/mix strength, with Meow Mix expanding through modernized packaging and Meow Mix Gravy Bursts. Hostess synergies and portfolio optimization were framed as a long-term growth driver.
- Supply chain and impairment headwinds: Mark noted supply-chain disruptions that weighed on results but were resolved, and Tucker discussed material impairment charges: $794 million goodwill impairment for Sweet Baked Snacks and $208 million for Hostess trademark, underscoring near-term GAAP earnings challenges while strategizing to stabilize and return the Hostess brand to growth.
- Financial outlook and guidance: The team reaffirmed a trajectory to improve profitability via gross-margin expansion and cost discipline. Tucker conveyed an adjusted EPS of $2.61 for the quarter (up 5%), and management signaled a higher full-year adjusted EPS midpoint ($9.85–$10.15) with free cash flow guidance upgraded to about $925 million. They emphasized debt reduction plans (net debt around $7.8 billion, targeting leverage near or below 3x by FY2027) and ongoing cost-synergy realization from the Hostess acquisition.
- Category and channel dynamics: Coffee pricing actions in June and October helped price realization, with volume mix weakening in Folgers and Dunkin but offset by Caf e9 Bustelo gains. The Frozen Handheld and Spreads segment benefited from Uncrustables, though fruit spreads and Jif peanut butter saw pressure. International and Away From Home remained a growth channel, with Away From Home up mid-teens on a comparable basis.
- Near-term vs long-term: While near-term GAAP results are pressured by impairment charges and supply-chain disruptions, the company remains confident in its five-pillar strategy (base portfolio delivery, distribution expansion, innovation pipeline, portfolio evolution, and revenue synergies). The overall signal is improving leverage, margin discipline, and growth in core brands that should support sustainable cash generation over time.
Net sales for the quarter would have been above our expectations, however, we experienced certain supply chain disruptions that negatively impacted our results, which I am pleased to say have been resolved.
— Mark Smucker
Taking all these factors into consideration, along with weighted-average shares outstanding of 106.7 million, third quarter adjusted earnings per share was $2.61, an increase of 5% versus the prior year. Based on the strong earnings year to date, we are raising the mid-point of our adjusted earnings per share guidance range to $10.00.
— Tucker Marshall
Forward Guidance
Assessment of Management Guidance and Industry Context:
- Revenue trajectory: Full-year net sales expected to rise about 7.25% year over year, incorporating Hostess Brands' full-year contribution, a ~1% headwind from divestitures, and ~1% currency/legacy portfolio effects. On a comparable basis, net sales are guided to grow ~0.75%, reflecting growth in Uncrustables, Meow Mix, Café Bustelo, and Milk-Bone.
- Margins and profitability: Adjusted gross margin targeted around 38%, led by better-than-expected margins in U.S. Retail Coffee and ongoing pricing actions to offset higher green coffee costs. SG&A is expected to rise ~8% due to a full-year impact from Hostess integration. The company aims to stabilize the Hostess business and drive synergies that bolster operating margin long-term.
- Profitability and cash flow: Net interest expense is guided near $390 million, with an adjusted tax rate around 24.1% and ~106.7 million shares outstanding. Full-year free cash flow is guided at about $925 million, with capex around $400 million. The management tone emphasizes rapid realization of Hostess synergies and ongoing cost discipline to support stronger FCF generation.
- Achievability assessment: The outlook hinges on the pace of Hostess integration, continued pricing power in coffee and select portfolios, and resilience in pet and sweet baked snacks amidst inflationary pressure. Non-cash impairment charges in Q3 are not recurring cash costs, but they reflect portfolio challenges that need ongoing strategic action. The credibility of achieving the 3x+ leverage target by FY2027 depends on sustained EBITDA recovery, cost synergies, and potential divestitures when advantageous.
- Monitoring priorities for investors: Progress on Hostess integration and revenue synergies; sustained margin expansion in Coffee and Milk-Bone/Meow Mix; resilience of international and Away From Home channels; commodity and FX headwinds; and the pace of debt reduction and deleveraging toward sub-3x EBITDA. Investors should watch the realization of operating leverage from Uncrustables expansion into new channels, and the impact of any further impairment or divestiture-related charges on GAAP earnings.
Competitive Position
Company
Gross Margin
Operating Margin
Return on Equity
P/E Ratio
SJM Focus
40.17%
-27.20%
-9.59%
-4.29%
CAG
25.00%
9.38%
1.65%
21.27%
K
36.40%
14.10%
10.10%
18.87%
GIS
33.90%
18.40%
6.75%
13.55%
HRL
16.80%
8.17%
2.25%
24.76%
Gross Profit Margin
Operating Profit Margin
Return on Equity
P/E Ratio Comparison
Investment Outlook
Smucker’s QQ3 2025 results present a bifurcated picture: exceptional brand momentum in Uncrustables, Café Bustelo, Milk-Bone, and Meow Mix supports a path to mid-term revenue growth and elevated cash flow, while non-cash impairment charges and supply-chain disruptions create near-term GAAP earnings headwinds. The company’s strategic focus on high-return platforms and the Hostess integration should unlock substantial long-run value, supported by a disciplined deleveraging plan (targeting sub-3x net debt/EBITDA by FY2027) and a free cash flow target of roughly $925 million for the year. However, investors should remain mindful of several risks, including macro voice in consumer spending, currency volatility, and commodity cost dynamics.
From a valuation standpoint, Smucker is trading with a solid brand premium in several segments and a diversified portfolio. The company’s adjusted EPS guidance and FCF outlook imply a path to sustainable cash generation even as GAAP profitability is depressed by impairment charges. Relative to peers such as General Mills, Campbell Soup, and Kraft Heinz, Smucker’s near-term margin profile will remain weighed by the Hostess-related adjustments and cost structure adjustments tied to the integration. Over the medium term, if Hostess synergies materialize as expected and brand momentum persists, Smucker could re-rate higher on improving operating performance and stronger cash conversion. Key catalysts include the pace of Hostess integration, expansion of Uncrustables in new channels, and continued price realization in coffee. Investors should monitor leverage trajectory, supply-chain resilience, and the management’s execution against the five-pillar growth framework to determine Smucker’s ability to translate brand equity into durable earnings and cash flow.
Key Investment Factors
Growth Potential
Strategic growth emerges from: (1) Uncrustables expansion into convenience channels and C-store with a goal of >$900M in annual net sales; (2) Café Bustelo’s nationwide expansion and new formats (K-Cup, pre-pack, cold brew, ready-to-drink) to broaden consumer reach; (3) Milk-Bone and Meow Mix innovation (Gravy Bursts, packaging modernization) to sustain leadership in pet-food segments; (4) Away From Home and international channels benefiting from brand strength and scale.
Profitability Risk
Near-term earnings volatility from supply-chain disruptions and impairment charges; forex exposure and commodity price volatility (green coffee costs); execution risk in Hostess integration and portfolio realignment; consumer discretionary spending pressures affecting sweet baked snacks and related channels; leverage trajectory and potential shocks to cash flow if promotions and acquisitions underperform expectations.
Financial Position
Gross margin around 40%, but operating and net margins compressed by impairment charges and higher SG&A post Hostess integration; trailing EBITDA ~$2.2B with leverage ~3.6x; plan to deleverage to <=3x by FY2027; cash balance of $47.0M and total debt ~$7.94B reflect a high-debt capital structure requiring continued FCF generation and cost efficiencies.
SWOT Analysis
Strengths
Diversified brand portfolio spanning beverages, pet foods, and sweet baked snacks with leading positions (Uncrustables, Café Bustelo, Milk-Bone, Meow Mix).
Scale in legacy operations combined with recently acquired Hostess assets enabling cross-brand revenue synergies (Uncrustables promotions, co-marketing).
Resilient, top-line brands with ongoing innovation pipeline (Gravy Bursts, Donettes innovations) and opportunities to expand into new channels (C-store, Away From Home).
Solid long-term free cash flow potential and an explicit deleveraging plan (target <=3x net debt/EBITDA by 2027).
Weaknesses
Near-term GAAP earnings are pressured by impairment charges ($794m goodwill; $208m trademark) and supply-chain disruptions.
High debt load and leverage around 3.6x; sensitive to commodity costs (green coffee) and FX headwinds.
Impairments and divestiture-related adjustments create earnings volatility and potential investor skepticism about sustained profitability in the short term.
Opportunities
Expansion of Uncrustables into new channels (C-store, Away From Home) to capture new buyer segments.
Growth in Café Bustelo through new roast profiles, formats, and ready-to-drink launches; potential price/mix advantages from premium offerings.
Cat and dog food growth via Meow Mix and Milk-Bone, leveraging innovation to capture share in a growing pet care market.
International and Away From Home growth potential, leveraging leading brands to expand global footprint.
Threats
Commodity price volatility (especially coffee) and potential inflationary pressures that affect pricing power and demand.
Currency fluctuations and foreign exchange headwinds impacting reported net sales abroad.
Competition in core categories (peanut butter, coffee, pet foods) and channel disruption risk (e-commerce dynamics, discount channels).
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