Snack maker J&J Snack Foods (NASDAQ:JJSF) has been performing well from the last few quarters. Its performance and the quarterly numbers are driven by its strategy of acquiring other businesses in order to grow big. The acquisitions not only lead to a wider product portfolio, but also boost overall revenue and earnings. Therefore, the company’s stock price appreciation, of 21% in the last one year and 137% in the last five years, is justified. Further, J&J Snack Foods registered a decent second quarter, even this time, enabling its share price to move north.
Analyzing the Numbers
Driven by higher demand for its products, revenue grew 2% over last year, clocking in at $205.3 million. The growth in the top line came in despite bad weather conditions which hampered sales of most of the retailers since customers were unwilling to walk up to the stores. Also, snowstorms led to store closures, resulting in loss of sales.
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Some of the star performers were the pretzel business and the frozen juice segment, which pushed revenue higher. Earnings also increased by 7% to $13.5 million over the prior year’s quarter.
Acquisition has been an important part of J&J Snack Foods’ growth. The company has recently taken measures to strengthen its pretzel segment. In October 2013, it acquired New York Pretzel which expanded the retailer’s presence in this segment. In fact, demand for pretzels has been on the rise. Hence, it is expected to benefit the retailer. Also, pretzel business registered an increase of 7% in its revenue, after excluding the effect of the buyout. This highlights the attractiveness of this segment.
Another segment, which registered growth during the quarter, was the food service segment, which grew 2% as sales to warehouse stores and other restaurant chains increased over last year. However, bakery segment was a drag as it witnessed a sales decrease of 1% with total revenue slightly below $1 billion.
J&J Snack Foods also managed to post a gross margin of 29.8% as against the margin of 28.9% in the previous year’s quarter. This expansion was a result of lower ingredient costs as well as the company’s efficient cost management measures.
What Lies Ahead?
Despite severe winter conditions, the snack maker managed to post a good quarter. Moreover, with the spring season coming in, J&J Snack Foods expects to see better days. Also, it plans to focus on introducing new products in order to attract more customers. This should add to its revenue.
Additionally, the company announced recently that it plans to make another acquisition. It plans to acquire Philly Swirl, which manufactures frozen treats and will add to the existing frozen products of the food retailer. Therefore, this buyout should help J&J to further boost its top line with annual revenue of $25 million.
J&J Snack Foods is a great performer and its quarterly numbers are proving it again and again. Its strategy of enhancing the pretzel segment has proved to be a wise decision. Also, expanding the frozen segment just before summer looks like a smart move. Moreover, the company is focusing on bringing in new products which should help add to its existing customer base. Hence, prudent investors should bank on its bright future.