J&J Snack Foods Corp. (JJSF, Financial) is a leader and innovator in the snack foods industry, providing nutritional and affordable branded niche snack foods and beverages to foodservice and retail supermarket outlets.
Manufactured and distributed nationwide, the principal products include Superpretzel, Bavarian Bakery and other soft pretzels, Icee and Slush Puppie frozen beverages, Luigi’s, Philly Swirl, Minute Maid whole fruit sorbets and frozen fruit bars, Whole Fruit sorbet, Tio Pepe's and California Churros churros, The Funnel Cake Factory funnel cakes and several cookie brands within Country Home Bakers.
J&J Snack Foods reported decent second-quarter results, and there were operating income and revenue gains. Higher demand for pretzels, juices and frozen beverages should help it to grow business in the future. Recent acquisitions helped the company expand its portfolio. The company is rolling in new products, and the future looks bright. All of its businesses contributed to the improved results in sales and net earnings.
Second-quarter results
Sales increased by 2% and were $229.7 million ($225.0 million in the prior-year quarter).
Net earnings increased by 6% and were $15.6 million in the current quarter ($14.6 million in the prior-year quarter).
Earnings per diluted share increased by 6% and were 83 cents for the second quarter (78 cents during the prior-year quarter).
Operating income increased by 7% and was $23.3 million in the current quarter ($21.8 million in the prior-year quarter).
Cash and cash equivalents during the quarter was $89.3 million.
Operating expenses during the quarter was $20.3 million.
For the six months ended March 26, sales increased by 3% and were $452.6 million ($437.8 million in the prior-year period). Net earnings increased by 10% and were $28.6 million in the six months ($25.9 million during the prior-year period). Earnings per diluted share increased by 10% and were $1.52 ($1.38 during the prior-year period). Operating income increased by 8% and was $41.6 million this year ($38.4 million during the prior-year period).
Competition
Snack food and bakery products markets are highly competitive. The company’s principal products compete against similar and different food products manufactured and sold by numerous other companies, some of which are substantially larger and have greater resources than the company.
As the soft pretzel, frozen juice treat and dessert, bakery products and related markets grow, additional competitors and new competing products may enter the markets. Competitive factors in these markets include product quality, customer service, taste, price, identity and brand name awareness, method of distribution and sales promotions.
The company is the only national distributor of soft pretzels. However, there are numerous regional and local manufacturers of food service and retail supermarket soft pretzels as well as several chains of retail pretzel stores.
In Frozen Beverages the company competes directly with other frozen beverage companies. These include several companies that have the right to use the Icee name in portions of nine states. There are many other regional frozen beverage competitors throughout the country and one large retail chain that uses its own frozen beverage brand.
The company competes with large soft drink manufacturers for counter and floor space for its frozen beverage dispensing machines at retail locations and with products that are more widely known than the Icee, Slush Puppie and Parrot Ice frozen beverages. The company competes with a number of other companies in the frozen juice treat and dessert and bakery products markets.
Strategic initiatives
- Cost reduction.
- Acquisition of New York Pretzel.
- Acquisition of Philly Swirl in May 2014.
- Plans to aquire smaller companies.
- Partnered with Mondelez (MDLZ, Financial).
Positive attributes of the company
- Acquisition of New York Pretzel helped it grow.
- Acquisition of Philly Swirl helped in the growth of the retail supermarket segment.
- It provides a wide array of products.
- Robust acquisition strategy.
- New product developments.
- Returning significant cash to shareholders.
Current focus
- Innovate and evolve strong brands.
- Manage costs.
- Facilitate franchisee development.
- International development and brand building.
On a concluding note
It is a company with profitable sales growth, increasing efficiencies, prudent capital allocation and good cash flow from operations. Finally, with the recent quarterly release, the company is aiming for a better future and is all set to deliver a healthy menu to its investors. It is expected to create greater shareholder returns.
It was selected by Forbes magazine as one of the "200 Best Small Companies" from 2003 to 2007 for having shown a consistent pattern of positive growth during a five-year period as well as over the last 12 months. (wikinvest)
For more than 42 years, J&J Snack Foods has been a constant leader in the niche snack food and beverage segment. The company grows its business every year. It is devising strategies to strengthen its position in the market. The demand for packaged foods is growing each day since it saves a lot of time. This company has plenty of room to grow, and investors should consider adding it to their portfolios.
Disclosure: I do not hold any position in the company.
