Sanfilippo John B & Son (JBSS) Q4 2026 earnings call transcript

Thank you, Michelle. Good morning, everyone, and welcome to our Fiscal 2026 Fourth Quarter Earnings Conference Call. Thank you for joining us. On the call with me today is Frank Pellegrino, our CFO, and Jasper Sanfilippo, our COO. We may make some forward-looking statements today. These statements are based on our current expectations and they involve certain risks and uncertainties. The factors that could negatively impact results are explained in the various SEC filings that we have made, including Forms 10-K and 10-Q. We encourage you to refer to the filings to learn more about these risks and uncertainties that are inherent in our business. Now I will turn to results. I am pleased to report on a strong fiscal 2026 with net sales reaching a record $1.2 billion and diluted earnings per share increasing 4.6% for the full year.

Achieving record net sales and earnings growth in a challenging consumer and cost environment is a testament to the strength of our business, the dedication of our team, and the depth of our customer relationships. In addition, we remain committed to returning capital to our shareholders. During the 2026 calendar year, we increased our annual dividend by 5.6% to $0.95 per share and declared a special dividend of $1.05 per share, representing a 75% increase with the prior year. Both dividends will be paid on September 9, 2026, bringing total dividends paid during 2026 calendar year to $3.50 per share.

This year marks our 15th consecutive year of returning capital to shareholders through dividends and the 9th consecutive year of increasing our annual dividend, reflecting the strength of our balance sheet, our consistent cash generation, and our ongoing commitment to creating long-term shareholder value. While our bottom line results for the most recent fourth quarter did not match last year's results, we were encouraged to see a return to growth in our company-wide sales volume after five consecutive quarters of decline. We believe this is a positive signal for our entire portfolio. Fourth quarter profitability was impacted by several challenges, including higher than anticipated input and transportation costs, manufacturing inefficiencies associated with the continued onboarding of a large contract manufacturing customer, and certain customer-related charges.

We are actively responding to these increased costs, executing mitigation plans to manage unexpected customer charges, and improving operational efficiencies as we move into fiscal 2027. There are three key priorities for JBSS in the coming year.

First, we are focused on restoring volume in the snack nut and trail mix categories. Consumer trends indicate that shoppers remain highly value conscious after several years of elevated prices across the snacking segment. To address this, we are working with an external partner on a consumer study to better understand how we can re-engage shoppers and drive volume growth without sacrificing margin. These insights will help guide our approach to optimizing value propositions, pack price architecture, promotional effectiveness, and selective price adjustments. There continue to be positive tailwinds in the NUT category as strong health and wellness trends are having a significant impact on consumer food purchases. Our second priority is to expand our bar portfolio and sell through the significant new manufacturing capacity we have added at our Elgin facility.

Our engineering team has done an outstanding job bringing the new high-speed bar lines we purchased online, and we expect them to be fully operational by the second quarter of fiscal 2027. In parallel, our R&D, sales, marketing, procurement, and technical services teams have worked hard together to build a robust pipeline of new products that have been presented to customers. Consumer trends are strong for higher protein and higher fiber products, and our bar portfolio is positioned perfectly to meet this growing demand. We are very optimistic about securing new distribution in the near future, and we estimate over $300 million in potential new growth for JBSS as we sell the capacity on these lines.

Our third priority is to manage cost volatility with a relentless focus on productivity. Like many food manufacturers, we continue to face uncertainty across commodities, packaging, energy, transportation, labor, and tariffs. Teams across our organization are focused on reducing costs where possible while improving productivity and efficiency. Key areas of focus include AI-enabled process enhancements, plant efficiency, skew rationalization, trade spend effectiveness, procurement savings, and supply chain optimization. I will now turn the call over to Frank to discuss our financial performance.

Thanks Jeffrey. Starting with the income statement, net sales for the fourth quarter of fiscal 2026 increased by 4.2% to $280.4 million, compared to net sales of $269.1 million for the fourth quarter of fiscal 2025. The increase in net sales was due to a 2.8% increase in the weighted average sales price per pound and a 1.4% increase in sales volume for pounds sold to customers. The increase in the weighted average selling price primarily reflected pricing actions taken in response to higher commodity acquisition costs for peanuts and all major tree nuts except walnuts, Which was partially offset by a shift in product mix towards lower priced items in the current quarter. Sales volume in the consumer distribution channel slightly increased by 0.8% due to a 2.4% increase in private brand sales, reflecting higher volume in private label nuts and trail mix.

Law was partially offset by decreased borrowers volume due to our strategic decision to reduce sales to a grocery store retailer. The increase in private label nons and trail mix volume was positively impacted by initial shipments to the new grocery retailer and expanded distribution at two existing grocery retailers, which was partially offset by lost private label business In addition our branded sales were negatively impacted by decreased Fisher recipe nut sales due to the timing of the Easter holiday and related promotional activity as well as lower sales of southern style hunter mix which was temporarily withdrawn from the market following a product recall of an externally sourced ingredient contained in that snack mix Sales volume decreased 5.4% in the commercial ingredients channel, mainly driven by timing of peanut crushing stock sales, and sales volumes were elevated in the preceding quarter.

Food server sales volume remained relatively flat in the quarterly comparison. Sales volume in the contract manufacturing channel increased 12.6% due to increased snack nut sales to a significant new customer that we added during the second quarter of the prior year. This increase was partially offset by a decrease for NOAA sales value. Gross profit decreased by $4.6 million or 9.5% to $44.1 million compared to the fourth quarter of last year, driven by $2.7 million of recall related costs associated with the dry milk powder supplied by a third party manufacturer incorporated in our selling solid nuts products. Gross profit was also negatively affected by higher customer claims, higher snack bar ingredient costs, manufacturing efficiencies, and higher freight expense.

Gross profit margin decreased to 15.7% of net sales, compared to 18.1% for the fourth quarter of fiscal 2025, due to the reasons previously mentioned and partially offset by higher net sales base. Total operate expenses increased by $3.1 million compared to the prior year of fourth quarter, driven by higher incentive compensation, freight and marketing insights expenses, which was partially offset by estimated insurance recovery associated with the dry milk powder reflux. Total operating expenses and percentage of net sales for the fourth quarter of Fiscal 2026 increased to 11.3% from 10.6% compared to prior year comparable quarter. Interest expense was $400,000 for the fourth quarter of Fiscal 2026 compared to $1.2 million for the fourth quarter of Fiscal 2025 due to higher average line of credit levels.

Net income for the fourth quarter The year of fiscal 2026 was $8.4 million, or $0.71 per diluted share, compared to $13.5 million, or $1.15 per diluted share for the fourth quarter of fiscal 2025. Now I am taking a look at inventory. The total value of inventory is on hand at the end of the current fourth quarter decreased 8.8 million, or 3.4%, compared to a prior year of comparative quarter. The decrease was driven by lower finished goods inventories for bars, lower walnut acquisition costs, and lower on-hand quantities of pecans and walnuts, which were partially offset by higher pecan and almond acquisition costs. The weighted average cost per pound of raw nut and dried fruit input stock on-hand increased 12.1% due to higher pecan and almond acquisition costs partially offset by lower walnut acquisition costs.

Moving on to year-to-date results. Net sales for FY26 increased 6.2% to $1.2 billion compared to FY25. The increase in net sales was primarily attributable to an 8.9% increase in the weighted average selling price per pound, which was partially offset by a 2.5% decrease in sales volume. The sales volume decrease was due to lower sales volume in the consumer channel, partially offset by sales volume increases in the commercial ingredients and contract manufacturing channels. The gross profit margin decreased to 18% of net sales compared to 18.4% in the prior fiscal year, mainly attributable to the factors noted earlier in the quarterly comparison and lower inventory valuation adjustments, which were partially offset by aligning our pricing more closely with our commodity acquisition costs and the absence of a one-time pricing concession recognized in the prior year.

Total operating expenses increased $3.2 million in fiscal 2026 compared to fiscal 2025. Primarily due to higher incentive compensation expense, this increase was partially offset by the estimated insurance recovery related to the dry milk powder recall, Lower compensation expense, a net gain of disposal of non-core equipment compared to a net loss in a prior year, and reduced marketing and insight spending and lower third-party warehouse costs.

Interest expense was $2.4 million for fiscal 2026, compared to $3.6 million for fiscal 2025. That income for fiscal 2026 was $61.9 million, or $5.26 per doula to share, and part of $58.9 million, or $5.03 per doula to share for fiscal 2025. Please refer to our 10-K for additional details regarding our financial performance for fiscal 2026. Now I will turn the call over to Jeffrey to provide additional comments.

Thanks, Frank, for the financial updates. Now let's shift to consumption activity and category updates. All the market information I'll be referring to is Surkana panel data, and for today it is for the period ending June 28, 2026. When I refer to Q4, I'm referring to 13 weeks of the quarter ending June 28, 2026. References to changes in volume are versus the corresponding period one year ago. For pricing commentary, we are using Sercana Mulo scan data, and we are referring to average price per pound.

We are using the nut, trail mix, and bar syndicated views of the category as defined by Sercana. In the fourth quarter, we continue to see modest growth in the broader snack aisle as defined by Sercana. Volume in dollars were up 0.7% and 3% respectively, driven by price increases. This is consistent with the performance we saw in Q3. In Q4, the snack nut and trail mix category was down 7% in volume and 3% in dollars, which is a continued acceleration of the volume softness we saw last quarter. Snack nut prices rose 5%, with increases across nearly all nut types. Prices rose 7% for trail mixes. Our private label, consumer snack and trail shipments performed substantially better than the category, with pound shipments up 3% versus last year.

This positive momentum was driven by new distribution across several grocery retailers. Fisher's snack and trail mix performed better than the category, with pound shipments up 15%. Fisher's performance was due to expanded Our Southern Style Nut brand experienced a 27 decrease in pound shipments driven by a voluntary recall within the Southern Style portfolio which Frank already mentioned Now let me turn to the recipe nut category. In Q4, the recipe nut category was up 6% in pounds and up 12% in dollars, driven by growth in private label as a discount retailer expanded store accounts. The recipe category experienced a 7% price increase driven by pecans. Our Fisher recipe pound shipments were down 12% in Q4 due to slower velocities among grocery retailers.

Now we will switch to the bar category. In Q4, the bars category grew by 2% in pounds and 5% in dollars, which is consistent with last quarter. Bars category momentum continued to be driven by a branded player growth in the protein segment of the bar category. Private label was down 5% in pounds and down 4% in dollars as consumer preferences shift to protein bars, which is comprised primarily of branded offerings.

Private label bar shipments were down 3% versus a year ago, which is consistent with private label category trends. In closing, as we enter fiscal 2027, we have strong momentum and optimism as we continue to execute our strategic plan. We are actively pursuing additional opportunities to grow sales volume across all three of our distribution channels, and we are encouraged by early signs of success. At the same time, we remain focused on discipline, cost management, and driving further operational efficiencies. That said, we recognize that significant external uncertainties remain, including tariffs, inflation, unpredictable commodity costs, and broader macroeconomic challenges. These factors will require us to stay agile and responsive as the year progresses. We are committed to taking the necessary actions to deliver long-term sustainable growth, enhanced margins, and continue to create value for our customers, consumers, and shareholders.

As I mentioned last month, I will be stepping down as Chief Executive Officer in October to assume the role of Executive Chairman, and my brother Jasper will succeed me as CEO. Over the last several years, we have made significant investments in our people, our capabilities, and our infrastructure that we believe will support long-term sustainable growth. These investments, combined with a disciplined growth strategy focused on continuous improvement, innovation, customer partnership, and operational excellence, should position the company for continued success. Under Jasper's leadership, I'm confident JBSS will continue to execute its strategic plan, strengthen its market position, and capitalize on future growth opportunities. As I reflect on the past 20 years, I want to sincerely thank our current and former employees for their hard work, dedication, and commitment.

Together, we have transformed JBSS into a stronger, more diversified, and more profitable organization, I will now turn the call over to management for the company. Our ability to remain nimble, adapt to changing market conditions, and work collaboratively to serve our customers has been a key driver of our success and is a big part of our culture. It has been an honor to lead this remarkable organization as CEO, and I am deeply grateful to our employees, customers, suppliers, and shareholders for their trust, support, and partnership throughout this journey.

We appreciate your participation in the call, and I thank you for your interest in our customers. I will now open the call to questions.

Michelle, you can open up the lines. Thank you. As a reminder, to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, press star 11 again. Our first question comes from Hamad Korsan with BWS Financial. Your line is open.

Good morning. Could you just expand upon the comment that I heard you say about litigation expense and customer charges and what's going on there?

So we had some unexpected deductions from a major customer that we are still negotiating with that customer to regain some of those deductions. So something out of our control that occurred in Q4, but we are working actively to try to get some of that money back. Okay, and my other question was, any update as far as the new equipment being installed and acceptance with any new potential customers?

This is Jasper. We're currently on track for both the high-speed fruit and grain and the Chewy Bar line. We're expecting the Chewy Bar line to be up and operational by the end of October, and then the fruit and grain bar shortly thereafter.

No, we are actually actively pursuing new customer business. We've created a lot of samples that have gone out to all our key customers. A very positive response from them. But yeah, the operation will be up and running. We're hoping in October to actually produce products. So as soon as we get a new customer online, we will start shipping in the third quarter.

Yeah, actually this week we're testing the functionality of the Chewy Bar Kitchen, and then we'll follow that with actually making the bars so that I'm running through packaging. So we are on time and looking in good shape for both lines.

Yeah, it's a combination. We're looking at innovation, obviously. Protein and fiber is a very important product line that we've recently launched in our Orchard Valley Harvest. It's a GoGo protein peanut, and we are launching a GoGo protein almond. So we're really looking at consumer trends. Protein is high, fiber is extremely important. So we're looking not only at the product, but then also the pack sizes and the price points. So making really selective promotional price points that we feel will help us drive growth in the category.

Thank you.

Good morning.

No, we will do our best to pass those costs along. Again, if they keep increasing, it becomes more difficult, but those are incurred during the quarter and we will pass those along during our next pricing review How much of that was that in the quarter Is it like a small amount Is it a couple million dollars It was a couple million dollars It was a couple million dollars and we are working hard to get those price increases for freight with our customers today We should expect to see that in Q2.

It's mainly freight and fuel-related surcharges, and also the resident market is up with packaging, which is kind of related to fuel also. So all those things that kind of escalated during the quarter that are out of our control.

Correct.

Yeah, we through Q4 did commercialize both some fig bar offerings as well as some protein bar offerings. We'll continue to do so. We are running trials currently for other protein bars. We believe that some of those bars will be in the market sometime early Q3. But we do continue to add capabilities to our current protein bar line to keep up with the growing brand that Jeff referred to with some of the branded players.

I had to guess somewhere between three to five years.

We're actively working with both large retailers as well as some opportunities we've come across in the Coman channel. Yes, we're looking at everything from Club Channel, obviously Sam's in Costco, to Grocery, Alternative Channel, there's opportunities. And as Jasper mentioned, Coman, some of the big brands could be potential customers as well for us.

And you're right, the fastest growing segment is that protein forward. So you look at Bearbells, Bill Puff, David's, they're all doing extremely well in the category, and retailers see that growth and they're looking for private brand options.

Indirectly, yes. We're seeing them because nut prices are a little more competitive out there.

We haven't seen any effects from El Nino yet, but the crops look pretty decent out in California with maybe the exception of the early indications of the almond crop, but all the other crops look like they're in pretty good shape.

Yes, right now we're focused on just getting the successful brands emulated and give private label offerings in the retail market. I think the co-pack or the co-manufacturing opportunity for some of these brands does allow us to get into other channels where private label wouldn't work, for example, sports stores, gyms, and things of that nature. But yeah, at some point, we will work with our customers to develop proprietary formulas for them.

So if you look at the category, you've got the biggest volume would be something like fruit and grain, the chewy granola bars. These high speed lines will make us more competitive in those categories. But then the bigger focus is on research and development, innovation in the forward protein bars, as I mentioned earlier. And that's where the biggest growth is coming from, is those high protein bars in the category. So we have a combination of the volume items with chewy, granola, and fruit and grain, but then the high margin, high growth in the protein forward bars.

Sure. This is Jasper. The two high-speed lines are really balancing out our manufacturing capability. Obviously, there are certain SKUs that are high volume, which we will be moving to the high volume bar lines, but there are a lot of other SKUs that we have, both at large retailers and small retailers, that would not warrant running on a very, very high speed bar line. And so much like we did for Snack. and Trail, we developed our manufacturing capabilities to run low volumes very efficiently as well as high volumes very efficiently. And that's really what this investment represents, is just balancing out our manufacturing capabilities to better fit our customer demands.

Q2 and Q3.

Thank you.

Thanks, Michelle. So we appreciate your participation in the call, and thank you for interest in our company. I would like to mention that upcoming events, the company will be presenting at the BWS Financial Growth and Values Summer Investor Series Conference in New York City this coming Tuesday, August 25th, And the Midwest Ideas Conference in Chicago on August 27th. Qualified investors that would like to schedule a meeting with management should contact three-part advisors at the phone number below. Thank you for your interest. Have a great day.