• Net Sales: Increased 3.4% to $301.1 million from $291.2 million in Q2 fiscal 2024.
• Sales Volume: Increased 7.1%, partially offset by a 3.4% decrease in weighted average sales price per pound.
• Gross Profit: Decreased $5.7 million or 9.8% compared to the previous year.
• Gross Profit Margin: Decreased to 17.4% from 19.9% in Q2 fiscal 2024.
• Operating Expenses: Increased $2.5 million, reaching 10.9% of net sales from 10.4% in the prior year.
• Interest Expense: $800,000, down from $1.1 million in Q2 fiscal 2024.
• Net Income: $13.6 million or $1.16 per diluted share, down from $19.2 million or $1.64 per diluted share in Q2 fiscal 2024.
• Inventory Value: Increased $8.5 million or 4.3% year-over-year.
• Weighted Average Cost per Pound: Increased 33.7% year-over-year.
• Year-to-Date Net Sales: Increased 9.9% to $577.3 million.
• Year-to-Date Gross Profit Margin: Decreased to 17.1% of net sales.
• Year-to-Date Net Income: $25.3 million or $2.16 per diluted share, down from $36.8 million or $3.15 per diluted share.

• Warning! GuruFocus has detected 2 Warning Sign with JBSS.

Release Date: January 30, 2025

For the complete transcript of the earnings call, please refer to the full earnings call transcript.

Positive Points

• John B Sanfilippo & Son Inc (NASDAQ:JBSS) reported its largest quarterly sales volume and highest net sales in the company's history for the second quarter.
• Sales volume increased across all three distribution channels, with a notable 28% increase in bar sales volume over the prior-year quarter.
• The Fisher recipe brand had a successful holiday season, outperforming the category and enhancing the baking category with its branded program.
• The company successfully relocated its warehouse distribution to a new facility, freeing up space for expanded production capabilities.
• JBSS is focused on enhancing profitability through operational efficiencies, optimized pricing strategies, and cost optimization initiatives.

Negative Points

• Gross profit and margins were negatively impacted by competitive pricing pressure and strategic pricing decisions, leading to decreased average selling prices.
• Input costs for commodities like chocolate and walnuts remain elevated, causing significant margin compression.
• The weighted average sales price per pound decreased by 3.4%, primarily due to higher sales volume of lower-priced products.
• Operating expenses increased due to higher freight, rent, and compensation expenses, despite decreases in incentive compensation and marketing expenses.
• Net income for the second quarter decreased to $13.6 million from $19.2 million in the same quarter of the previous year.

Q & A Highlights

Q: Can you provide more details on the current pricing environment and its competitiveness? A: Jeffrey Sanfilippo, CEO, explained that increased commodity costs, particularly in almonds, chocolate, cashews, and walnuts, have put pressure on margins. The company typically reviews pricing with retail partners every six months, which delays the impact of raw material costs. Competitive pricing pressure is also present as some brands are not raising prices to maintain volume growth. JBSS has initiated price increases for all brands and private brand customers, effective in Q3.

Q: Will the recent price adjustments help return gross margins to historical levels? A: Frank Pellegrino, CFO, stated that returning to historical gross margin levels is a long-term goal. The company has a process in place to achieve this over the next several quarters.

Q: How sustainable is the current pricing strategy for branded products given the commodity environment? A: Jeffrey Sanfilippo noted that while brands may continue to invest in maintaining market share, JBSS is focusing on reducing operating costs and improving supply chain efficiencies to enhance margins.

Q: Will there be any costs associated with starting new production lines that could impact margins? A: Jasper Sanfilippo, COO, mentioned that most costs related to new production lines will be capitalized, with minimal impact on margins expected from equipment relocation and installation.

Q: Can you provide an update on the Lakeville facility's performance and its financial impact? A: Jasper Sanfilippo reported that Lakeville experienced one-off expenses due to inventory relocation and temporary equipment installation. Despite these, the facility is focused on service and inventory building, with expectations for increased profitability as production expands.

For the complete transcript of the earnings call, please refer to the full earnings call transcript.