The J.M. Smucker Company

Good morning and welcome to the J.M. Smucker Company's Fiscal 2021 Third Quarter Earnings Conference Call. This conference is being recorded and all participants are in a listen-only mode. We will open the conference up for questions and answers after the prepared remarks. Please limit yourself to two questions during the Q&A session and re-queue if you have additional questions. I will now turn the conference over to Erin Broholm. Vice President, Investor Relations. Please go ahead, sir.

Good morning, and thank you for joining us for our fiscal 2021 third quarter earnings conference call. After this brief introduction, Mark Smucker, President and CEO, will give an overview of the quarter's results and an update on strategic initiatives. Tucker Marshall, CFO, will then provide detailed analysis of the financial results and our updated fiscal 2021 outlook. During today's call, we will make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. I encourage you to read the full disclosure concerning forward-looking statements in this morning's press release, which is located on our corporate website at jmsmucker.com. Please note we use non-GAAP results to evaluate performance internally as detailed in the press release. We have posted a supplementary slide deck summarizing the quarterly results. These slides can be accessed on our website and will be archived there along with a replay of this call. If you have additional questions after today's call, please contact me. I will now turn the call over to Mark Smucker.

Thank you, Aaron. Good morning, everyone, and thank you for joining us. As we highlighted last week during our Cagney presentation, our results for the third quarter exceeded our expectations, reflecting the continued, elevated at-home consumption, improved execution of our strategy, and momentum for our brands. Net sales increased 5% versus the prior year, while comparable sales increased 7%. We delivered net sales growth across all three of our U.S. retail segments, with coffee sales increasing 12%, comparable sales within consumer foods increasing 16%, and our pet food and pet snacks sales increasing 6%. Adjusted earnings per share increased 4%, driven by increased sales volume, Partially offset by higher costs and SD&A expenses, inclusive of incremental marketing investments supporting our brands. Due to stronger than anticipated results through the first three quarters of the fiscal year and updated assumptions for the fourth quarter, we are pleased to increase our full year expectations to include net sales growth of 2% versus the prior year, Adjusted earnings per share in the range of $8.70 to $8.90 and free cash flow of $1.1 billion. We are delivering exceptional financial performance while significantly increasing investments in our brands, strengthening our balance sheet, and returning cash to shareholders, all of which are important building blocks for supporting long-term growth and increasing shareholder value. At our investor day and last week's Cagney conference, we provided details around our current priorities that will strengthen our executional capabilities and unlock the full potential of our strategy. These include driving commercial excellence, streamlining our cost infrastructure, reshaping our portfolio, and unleashing our organization to win. We made significant progress against these priorities in the quarter, specifically in the areas of improving commercial execution and reshaping our portfolio. We continue to benefit from strong demand for our brands and achieved a fourth consecutive quarter of net sales and earnings growth. Our performance reflects the outstanding work our teams have done to increase production and ensure our products are getting on shelf while minimizing any potential disruptions. We continued our trend of improving market share across our portfolio as we increased our dollar market share in core consumer and coffee segments as well as for our cat food business. Highlighting the strength of our broad brand portfolio in these categories. In aggregate, we grew share for brands representing 53% of our sales, up from 46% in the second quarter. We are confident the actions we are taking, along with the macro events that have occurred over the past year, will translate to sustained tailwinds for our business. We are well positioned to maintain a meaningful portion of increased consumption for the long term, supported by our marketing investments, enhanced commercial execution, and improvement in share trends. Our confidence is further supported by external factors, including retailers' desire to simplify assortment, providing more shelf space for our leading brands, Approximately half the U.S. workforce is expected to work remotely on a part or full-time basis post-pandemic, compared to just 30% before the pandemic, driving increased at-home breakfast and lunch occasions, benefiting our coffee and consumer foods businesses. And tailwinds for the pet category, with consumption projected to grow approximately 5%, over the next few years as nearly 10 million households adopted a cat or dog over the past 12 months. We have made great progress in reshaping our portfolio, having completed the sales of the Crisco and Natural Balance businesses in the quarter. These divestitures underscore our commitment to further our focus on brands and categories that have the greatest growth opportunities over the long term. As we move ahead, we will continue to evaluate all elements of the portfolio and make changes when necessary to ensure our portfolio is positioned for growth. Turning to our segment results, in pet food, our market-leading dog snacks and our cat food businesses delivered another quarter of net sales growth. Sales for dog snacks increased 14%. led by gains for the Milk Bone, Pepperoni, and Rachel Ray Nutrish brands. Sales growth for the Meow Mix brand led cat food growth of 9%, representing the 14th consecutive quarter of cat food growth, with our share increasing in both the dry and wet cat categories. In dog food, sales for our largest brand, Nutrish, grew 4%. In consumption, share trends for Nutrish dog food have stabilized, with repeat rates and dollars per buyer increasing versus the prior year. For the total brand, Nutrish net sales were up 8% in the quarter, reflecting the growth for dog food, as well as increases for cat food, dog snacks, and cat snacks. Turning to our coffee business, We deliver net sales growth for all brands and segments in our market-leading coffee portfolio, as total segment net sales increased 12%, led by the Dunkin' and Folgers brands. The Dunkin' and Café Bustelo brands, as well as K-Cups, have become an increasingly important part of our portfolio. Collectively growing over 20% and accounting for over 50% of segment net sales in this quarter. Cafe Bustelo and Dunkin' are the two fastest growing brands in the coffee category, with 52-week sales up 28% and 21% respectively. The Dunkin' brand has eclipsed $1 billion in all-channel retail sales dollars. Inclusive of Club and eCommerce over the past 12 months. The Folgers brand gained 3 million new households at the height of the pandemic and had the highest repeat rate by new consumers during the holiday season. Further, our portfolio of brands gained more incremental households in the last year than any other manufacturer and has gained share in all channel consumption Inclusive of Club and e-commerce. In our consumer food segment, growth across all categories drove a 16% increase in comparable sales. The actions we have taken on the Jif brand led to over 20% sales growth on core peanut butter offerings. In multi-outlet retail sales, Jif was the fastest growing national brand in the quarter, Increasing over 13%, more than twice the category average. This growth reflects benefits of improved distribution and in-stocks, strong marketing support, pricing actions in response to higher costs, and competitive supply disruption. The GIF brand gained over three points of volume and dollar share sequentially from the second quarter, and our total peanut butter portfolio grew to over a 50% share of the peanut butter category. Our Smucker's Uncrustables business also continued to deliver exceptional growth, with third quarter net sales increasing 21%. Household penetration is up 23% compared to a year ago. For our combined U.S. retail and away-from-home segments, the Uncrustables brand delivered $100 million of net sales this quarter, recording its 27th consecutive quarter of growth. The brand is on pace to deliver over $400 million of net sales this year and is on track to exceed our $500 million target in fiscal year 2023. Underpinning the improvement in net sales and market share across our businesses has been strong commercial execution, optimized marketing investments to align with consumer behavior, and a continued commitment to financial discipline. We plan for a continued step up in marketing investments in the fourth quarter, inclusive of mass media, targeted digital consumer engagement, e-commerce, and Click and Collect Programs as we continue to reinvest to support our brands. Finally, we are sharpening our efforts to address issues that impact the quality of life for people and pets. This evolved agenda helps meet their needs for quality food, education, equitable and ethical treatment, community resources and a healthier planet. Additional details are available on our corporate website. In summary, I would like to reinforce a few key points. First, we continue to deliver strong financial results, and the actions we are taking to deliver our priorities are leading to improvement in key metrics, including market share, that position us well for the remainder of the year and beyond. Second, we continue to make progress against our consumer-centric growth strategy. Third, through our executional priorities, we are becoming a more focused, efficient, and agile organization. And fourth, we are strengthening our core capabilities, which position us as a stronger company set up for delivering sustainable long-term growth and shareholder value. These actions will ensure we continue to deliver consistent sales and profit growth beyond the pandemic, leveraging a strong portfolio of brands and world class commercial capabilities, all of which are powered by our unique culture and dedicated employees who I would like to thank for their outstanding contributions. I'll now turn the call over to Tucker.