ORRVILLE, Ohio, U.S. — The J. M. Smucker Company provided a business update today regarding COVID-19, specifically the status of its operations, supply chain, and financial outlook related to the Company’s fiscal year ending April 30, 2020.
“As we experience one of the most challenging times in our nation’s history, we remain committed to providing a safe and reliable supply of food,” said Mark Smucker, President and Chief Executive Officer. “Our team is united in supporting our customers, consumers, and communities in this time of heightened need, while doing our part to help slow the spread of COVID-19. I am thankful for each and every employee that continues to support our efforts, including our 5,700 employees directly involved in making and distributing our products and servicing our customers.”
Operations and Supply Chain
The J. M. Smucker Company continues to work closely with its suppliers and customers and has taken actions to ensure business continuity, maximize product availability, and minimize potential disruptions across its supply chain. This includes increasing production at all its manufacturing facilities and expanding the availability of appointments at distribution centers.
Following the guidance of national and local experts, the Company has taken additional steps to protect its employees including implementing incremental sanitation measures and temperature screenings at all its locations. The Company has also provided additional support measures, including financial hardship awards to front-line employees. To date, all Company manufacturing and distribution facilities remain open, and none have experienced significant disruptions or illness-related labor shortages associated with the COVID-19 outbreak. The Company is closely monitoring the situation at all its plants, including its coffee production and distribution facilities in New Orleans, Louisiana, due to elevated cases of COVID-19 in the area. The Company has implemented additional protective measures to maintain business continuity for these facilities, including adding resources to supplement the workforce and build inventory.
The Company has implemented measures to allocate order volumes to ensure a consistent supply across its retail partners during this record period of demand. Following a significant increase related to consumer “stock-up” shopping during the month of March, the magnitude of demand increases has begun to moderate. However, consumer demand and customer orders remain elevated.
Updated Fiscal 2020 Financial Outlook
Unprecedented customer and consumer demand in the Company’s fourth quarter has improved its fiscal year financial expectations. The anticipated improvement will benefit both GAAP and non-GAAP results. The incremental earnings per share is comparable for both GAAP and non-GAAP measures.
For the fiscal year ending April 30, 2020, The J. M. Smucker Company now expects:
- Net sales to be down 1 percent to the prior year compared to previous guidance of down 3 percent, primarily due to increased demand across all U.S. and Canadian retail channels, slightly offset by a decline in products sold in away from home channels, which represent less than 10 percent of the Company’s total net sales.
- Adjusted earnings per share to exceed the high end of the previous guidance range of $8.10 to $8.30, reflecting the increased contribution from sales and a benefit of operational leverage resulting from increased production and reduced selling, distribution, and administrative expenses. These benefits will be partially offset by increased expenses related to employee compensation and benefits, freight, and community support initiatives.
- Free cash flow to exceed the previous guidance of $850 million with capital expenditures below the prior estimate of $300 to $320 million.
The Company continues to maintain adequate financial liquidity to manage its business and expects to continue operating under its previously communicated capital deployment model.
Fiscal 2021 Financial Outlook
Due to uncertainty about both near-term and long-term implications related to COVID-19, including the length and severity of the pandemic, the duration of stay-at-home orders and social distancing requirements, and broader macroeconomic considerations, the Company’s previous commentary regarding fiscal year 2021 financial direction is no longer applicable.
The Company’s practice is to provide net sales, adjusted earnings per share, and free cash flow guidance estimates for the next fiscal year with the release of its fourth quarter earnings.
However, financial guidance for fiscal year 2021 may not be reasonably estimated at that time depending on the duration and extent of the ongoing uncertainty related to COVID-19. The Company expects to provide more details when it releases its fiscal year 2020 fourth quarter financial results in June.
For information regarding the Company’s support measures for employees and communities, please see the detailed press release dated March 23, 2020 at jmsmucker.com.
