Release Date: May 01, 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) achieved a 50% increase in diluted earnings per share, driven by strategic cost control and alignment of selling prices with commodity costs.
• The company plans to invest approximately $90 million in expanding domestic production capabilities and infrastructure by the end of fiscal 2026, reflecting confidence in domestic manufacturing.
• Gross profit increased by 13.7% to $55.9 million, attributed to inventory valuation adjustments and manufacturing efficiencies.
• The company is focusing on innovation and cost-saving opportunities to mitigate significant commodity pressures, particularly in the Orchard Valley Harvest brand.
• Private label market share has grown within the bar category, with consumers appreciating the quality and value proposition, leading to sustained demand.

Negative Points

• Net sales for the third quarter decreased by 4% due to a 7.9% decline in sales volume, despite a 4.2% increase in the weighted average sales price per pound.
• Sales volume decreased across major product lines, including a 9.2% decline in the consumer distribution channel and a 12.9% decrease in branded products.
• Higher commodity costs for nuts, including almonds, walnuts, pecans, and cashews, are impacting profitability and necessitating difficult price increase discussions with customers.
• The company faces challenges from tariffs on imported nuts, with some products incurring tariffs over 140%, affecting supply chain costs and customer pricing strategies.
• The snack nut and trail mix category saw a 2% decline in volume, with Fisher snack and trail mix performing worse than the category, driven by inventory changes and lack of promotions at a major retailer.

Q & A Highlights

• Warning! GuruFocus has detected 4 Warning Signs with JBSS.

Q: For the 15-20% raw materials exposure due to tariffs, do you think you'll be able to pass off this cost to your customers since it's an industry-wide issue? A: Yes, everyone in the industry is affected. We are having discussions with our key customers about passing on these tariff increases. For smaller items with less than a 10% increase, we will optimize production and manage inventory. However, for key items with significant volume and value, we will pass on the increases to customers. (Jeffrey San Filippo, CEO)

Q: Regarding your cashew business, is it fair to say it's a break-even business, or what are the earnings in that area? A: The cashew segment is profitable. If the 46% tariffs are implemented, it would be challenging to pass on price increases, and consumer demand might decline. However, currently, cashews and mixed nuts align with our overall profit profile. (Frank Pellegrino, CFO)

Q: If you can't pass on the tariff increases, would you consider exiting the cashew business? A: Cashews are a significant part of our business, so we wouldn't exit completely. If higher tariffs hit, some retailers might choose not to stock certain items until prices stabilize. We are having discussions with retailers about these potential scenarios. (Jeffrey San Filippo, CEO)

Q: Do you expect to maintain the $0.60 per pound gross margin level in the next quarter with the price increases in place? A: The price increases were in place during the current quarter. A good indication of our future gross profit per pound can be derived by backing out the impact of the inventory evaluation from our gross profit section. (Frank Pellegrino, CFO)

Q: Regarding the $90 million investment, is it for adding more bar lines to your bar business? A: Yes, part of the $90 million investment is for expanding our bar infrastructure. We see growth opportunities in the bar category and are expanding production capacity in our Elgin headquarters. (Jeffrey San Filippo, CEO)

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