J&J Snack Foods Corp. (JJSF, Financial), a leader and innovator in the snack foods industry, reported first quarter results recently. The company witnessed strong sales of soft pretzels during the quarter. The food service business did well. Net earnings and operating income increased during the quarter. Gross profit improved during the quarter due to increased sales of other than bakery products in the food service segment, lower ingredient costs and improved operating efficiencies.
First quarter performance
Sales increased by 1% and were $225.6 million (from $222.8 million in the prior year quarter).
Food service segment witnessed sales of $150.3 million during the quarter (which was $146.8 million in the prior year quarter).
Soft pretzel sales to the food service market increased by 7% during the quarter and were $41.49 million. Sales to food service customers increased by 2% in the first quarter and were $150.3 million.
Net earnings increased by 4% and were $13.5 million in the current quarter (which was $13.0 million in the prior year quarter).
Earnings per diluted share ]were 72 cents for the first quarter (which marked an increase of 4% from 69 percent in the prior year quarter).
Operating income increased by 5% and was $19.3 million in the current quarter (from $18.4 million in the prior year quarter).
During the quarter, gross profit improved to 29.21% as a percentage of sales (from 28.64% during the prior year quarter).
Effective tax rate during the quarter was 34% (from 33% in the prior year quarter).
Sales of products to retail supermarkets increased by 2% during the quarter. Sale of frozen juices and ices increased by 9%.
Total operating expenses increased to $46.6 million due to increase in marketing and administrative expenses.
Total cash and cash equivalents as of Dec 24. were $141 million.
During the first quarter, net cash provided by operating activities was $26.4 million.
Dividend
The company recently declared a dividend of 42 cents per share.
Focus
- Emphasising on new and innovative products.
- Establishment of existing products in new markets.
- Robust acquisition strategy.
- Cost efficiency.
Conclusion
J&J Snack Foods is known to provide the customers with affordable snack foods and beverages options. Some of its products are: SUPERPRETZEL, BAVARIAN BAKERY, PHILLY SWIRL, frozen fruit bars and MARY B’S biscuits. It offers a wide array of products like soft pretzels, frozen beverages, churros, stuffed sandwiches and burritos.
The company recently acquired a premium bakery, Hill & Valley Inc., for around $31 million. The company is likely to benefit from this acquisition, since Hill & Valley, manufacturer of a variety of pre-baked cakes, cookies, pies and muffins rakes in around $45 million annually.
As per the Global Industry Analysts Inc., the global market for Snack Foods is projected to exceed $630 billion by 2020. This is fueled by the growing trend of healthy snacking. With rises in disposable income, this trend should see an upward drift. As per the reports, Europe is the largest market for this worldwide. Consumers are more inclined to portable, easy-to-carry foods these days.
2016 marked the 45th consecutive year of record sales. It is capitalizing on new opportunities. It is constantly innovating its menu. Higher demand for pretzels and frozen beverages should help the company grow further. It is widening its base through acquisitions. It has already created a niche in the snack foods industry. I think the company has growth potential and adding this company will reap shareholder returns.
Disclosure: I do not hold any position in the company.
