Analyst Note| Rebecca Scheuneman, CFA |
Smucker released tepid results for its July-ended fiscal first quarter, with 1% organic sales growth year over year, and a 4.5% bump versus the comparable 2019 period. While management outlined expectations for 2.5% organic revenue growth for the year, we deem the expected lift as lower quality, as it is mainly fueled by price increases versus volume gains. Consistent with our no-moat rating, we believe Smucker acts as a price taker and would generally be at risk of losing sales volume due to the price hike. But as Smucker’s competitors are also raising prices--given widespread inflation for raw materials, labor, packaging, and transportation--Smucker’s volumes should not be materially impacted. This widespread inflationary pressure caused Smucker’s gross margins to drop 370 basis points in the quarter, in line with our expectations.