[Management View]
The J. M. Smucker Company management confirmed that the annual profit outlook for fiscal 2026 remains unchanged at the midpoint, with positive elasticity in coffee offset by higher tariffs and updated hedging impacts. Strategic priorities include increased pricing actions in the coffee segment and SKU rationalization in Sweet Baked Snacks to drive cost benefits.

[Outlook]
Management raised full-year free cash flow guidance for fiscal 2026 from $875 million to $975 million, attributing the increase to ongoing legislative benefits. The company aims to achieve a three times leverage profile by the end of fiscal 2027. Sequential sales acceleration is expected across coffee, frozen handheld, spreads, and pet categories.

[Financial Performance]
Despite elevated coffee costs and tariff headwinds, full-year coffee profit targets remain on track due to increased pricing actions. The company expects low-to-mid-teens year-over-year sales growth for the coffee segment in fiscal 2026.

[Q&A Highlights]
Question 1: Andrew Lazar from Barclays asked about the updated pricing benefit in the coffee segment given new tariff headwinds.
Answer: Tucker Marshall stated that the current outlook for coffee pricing is in the mid-20s, including additional pricing actions in early winter due to increased tariffs. Volume impact is expected in the low to mid-teens, resulting in low to mid-teens overall growth for the segment year over year.

Question 2: Andrew Lazar inquired about the shift in EPS expectations for Q2 and Q3.
Answer: Tucker Marshall explained that the full-year outlook remains unchanged, but increased tariffs and higher-than-anticipated coffee costs in Q1 have shifted some profit expectations to Q3 and Q4.

Question 3: Peter Galbo from Bank of America asked about the elasticity assumptions and their impact on the top line.
Answer: Tucker Marshall detailed that the company experienced better-than-expected elasticity in Q1, leading to a $100 million increase in the coffee segment's full-year outlook. Future pricing actions are expected to have a greater elasticity factor than historical averages.

Question 4: Peter Galbo followed up on Milk Bone's growth expectations.
Answer: Mark Smucker confirmed that Milk Bone is expected to return to growth in the second half of fiscal 2026, driven by advertising, innovation, and tactical promotions, despite cautious consumer spending.

Question 5: Robert Moskow from TD Cowen asked about the impact of SKU rationalization on sweet baked snacks volume.
Answer: Mark Smucker clarified that SKU rationalization did not impact Q1 volume and is expected to improve profitability over time. The dedicated sales organization aims to enhance execution and focus on core competencies.

Question 6: Tom Palmer from JPMorgan inquired about the guidance implications for the second half of the year.
Answer: Tucker Marshall stated that profit expectations remain intact, with some profit shifting to Q3 and Q4 due to timing of coffee costs and tariffs.

Question 7: Peter Grom from UBS asked about the confidence in fiscal 2027 performance.
Answer: Tucker Marshall expressed confidence in the coffee portfolio's strong margins and ongoing stabilization efforts in the Hostess portfolio, supporting growth brands like Uncrustables and Meow Mix.

Question 8: Megan Klatt from Morgan Stanley asked about the increased free cash flow outlook.
Answer: Tucker Marshall explained that the $100 million increase is due to ongoing legislative benefits, with proceeds earmarked for debt reduction.

Question 9: Alexia Howard asked about potential tariff exemptions and GLP-1 drug impacts.
Answer: Mark Smucker stated that the company is monitoring trade policy changes and has not seen meaningful impacts from GLP-1 drugs on its categories.

Question 10: Max Comfort from BNP Paribas sought clarification on coffee pricing and volume assumptions.
Answer: Tucker Marshall confirmed that coffee outlook has increased by $100 million, with elasticity and tariffs balancing out to maintain profit expectations.

Question 11: Scott Marks from Jefferies asked about the impact of Hostess SKU reduction.
Answer: Mark Smucker emphasized that SKU rationalization focuses on profitability, with growth expected in core sub-brands like Donette.

[Sentiment Analysis]
Analysts expressed concerns about tariff impacts and coffee cost pressures, while management maintained a confident tone regarding strategic initiatives and future growth prospects.

[Quarterly Comparison]
| Metric | Q1 2026 | Q1 2025 | YoY Change |
|-------------------------|---------|---------|------------|
| Coffee Segment Growth | Mid-20% | N/A | N/A |
| Free Cash Flow Guidance | $975M | $875M | +11.4% |

[Risks and Concerns]
1. Elevated tariff costs impacting coffee segment profitability.
2. Sequential decline in second quarter earnings due to hedging activities and green coffee receipt timing.
3. Potential impacts from GLP-1 drugs on consumer food categories.

[Final Takeaway]
The J. M. Smucker Company is navigating a challenging fiscal environment with strategic pricing actions and SKU rationalization efforts. While tariff headwinds and coffee cost pressures pose risks, management remains focused on leveraging legislative benefits and driving growth across key segments. The company's commitment to innovation and targeted promotions is expected to support brand recovery and long-term growth.