J.M. Smucker (SJM -4.60%), the company behind brands like Folgers coffee, Jif peanut butter, and Smucker's fruit spreads, released its results for the first quarter of fiscal 2026 on August 27, 2025. The biggest news in this release was a 22% drop in adjusted (non-GAAP) earnings per share to $1.90 in Q1 FY2026 and a 1% decline in reported revenue (GAAP) to $2.11 billion in Q1 FY2026 compared to the prior-year period. However, management noted the quarter was better than expected, with core sales (excluding divestitures and currency effects) increasing 2%. This positive surprise allowed the company to raise its full-year FY2026 sales growth and free cash flow outlook. Despite severe pressure on profit margins and negative free cash flow (non-GAAP), leadership described the quarter as one of continued brand strength and disciplined cost management.
| Metric | Q1 FY26(Ended July 31, 2025) | Q1 FY25(Ended July 31, 2024) | Y/Y Change |
|---|---|---|---|
| Adjusted EPS (Non-GAAP) | $1.90 | $2.44 | (22 %) |
| Revenue | $2.11 billion | $2.125 billion | -0.7 % |
| Adjusted Operating Income | $370.3 million | $447.9 million | (17 %) |
| Adjusted Gross Profit Margin | 35.2 % | 39.2 % | (4.0 pp) |
| Free Cash Flow | ($94.9 million) | $49.2 million | ($144.1 million) |
| Segment Profit Margin – U.S. Retail Coffee | 18.7 % | 27.7 % | (9.0 pp) |
About the Company and Focus Areas
J.M. Smucker is a leading manufacturer and marketer of packaged foods and beverages in North America. Its brands occupy top positions in categories like coffee, peanut butter, fruit spreads, and snacks. The company's strategy revolves around maintaining its brand leadership, innovating with new products, and optimizing its business through acquisitions, such as the integration of Hostess-branded sweet baked goods, and divestitures that help focus on core segments.
Key to its ongoing success are its well-known brands, such as Folgers coffee and Jif peanut butter, strategic actions in acquiring or divesting product lines, and careful cost management. The company's growth also relies on balancing price increases, adapting to consumer trends, and managing risks tied to its dependence on large customers and volatile commodity costs.
Quarterly Highlights and Business Performance
The quarter featured lower reported revenue, down 1% from the prior-year period (GAAP). However, adjustments for portfolio changes reveal a 2% increase in core net sales. Net sales for U.S. Retail Coffee were up 15%, driven by higher prices rather than increased consumer volume. Volume and mix in this segment decreased 2 percentage points, with declines in the Dunkin' and Folgers coffee brands, partially offset by gains for Café Bustelo coffee. Segment profit in coffee dropped 22%, reflecting a sharp margin contraction from 27.7% to 18.7%. Management cited "higher commodity costs, unfavorable volume/mix, and higher marketing spend" as drivers of this decline in segment profit.
Uncrustables, a brand of frozen handheld sandwiches, continued to perform well within the Frozen Handheld and Spreads segment. Nonetheless, that category reported a 2% sales decrease (GAAP), as growth for Uncrustables was offset by lower pricing for peanut butter and weaker volume/mix for other items. The Pet Foods segment saw an 8% decline in net sales, largely due to lower volumes in dog snacks and a drop in contract manufacturing. Sweet Baked Snacks, anchored by Hostess snack cakes and similar products, posted a 24% decline in reported net sales and a 54% drop in reported segment profit, reflecting both the impact of divested value brands and ongoing weakness in the acquired Hostess franchise.
Margins across the company came under significant pressure compared to the prior-year period. Adjusted gross profit margin fell 4.0 percentage points to 35.2%, and free cash flow (non-GAAP) sank to negative $94.9 million from positive $49.2 million a year ago. This deterioration was linked to higher commodity and input costs, as well as a sequential increase in inventory. Inventory rose $176.6 million. Marketing investment increased $9.0 million year-over-year.
The company continued its longstanding capital return program, increasing its quarterly dividend by 2% to $1.10 per share. This extends its trend of annual dividend increases—a practice now in place for 23 consecutive years.
Looking Forward: Guidance and Key Watch Points
Management raised its full-year net sales growth target to 3.0–5.0%, up from a previous 2.0–4.0% for FY2026, reflecting better-than-expected top-line performance in the quarter. The new free cash flow forecast for fiscal 2026 is $975 million, revised up from $875 million, despite negative cash flow in the quarter itself. However, management maintained its previously issued earnings guidance, keeping the adjusted earnings per share range unchanged at $8.50–$9.50 for FY2026. This decision anchors expectations around persistent margin pressure and continued commodity cost headwinds.
Investors are advised to monitor several areas in the quarters ahead. The effects of ongoing commodity cost volatility and demand changes, particularly in coffee and sweet baked snacks, remain critical variables. Segment profit pressures in Pet Foods and Sweet Baked Snacks, now compounded by higher input costs, will also be in focus. The quarterly dividend was raised 2% to $1.10 per share.
Revenue and net income presented using U.S. generally accepted accounting principles (GAAP) unless otherwise noted.
