Grappling with lower demand due to higher costs, J.M. Smucker (NYSE:SJM) revealed a steeper-than-expected 11% drop in earnings in its fiscal third quarter on Thursday, leading the maker of Folgers coffee to slash its guidance.
The gloomy news from Orrville, Ohio-based Smucker sent its shares sinking as much as 10%.
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The company, which also makes its namesake jams and jellies as well as Jif peanut butter, said it earned $116.8 million, or $1.03 a share, last quarter, compared with a profit of $132 million, or $1.11 a share, a year earlier. Excluding one-time items, it earned $1.22 a share, badly missing the Street’s view of $1.41.
Revenue climbed 12% to $1.47 billion, trailing consensus calls for $1.54 billion.
In a sign of the higher costs, operating margins shrank to 31.7% from 36.1%. Overall volume slid 10%, while unit shipments slipped 8%.
"Despite having strong merchandising programs in place for the holiday period, our volume was lower than expected as a result of our higher price points coupled with lower consumer demand across the food industry,” Vince Byrd, president and chief operating officer at Smucker, said in a statement.
Smucker said U.S. retail coffee sales jumped 15% to $637.9 million last quarter, while consumer foods sales rose 7% to $556.5 million.
Looking ahead, Smucker warned it expects higher green coffee and peanut costs as well as continued volume softness in the short term.
With that in mind, the company cut its fiscal 2012 non-GAAP EPS view to $4.60 to $4.65, down from $4.90 to $5.00 previously. Smucker also trimmed its full-year sales forecast to $5.5 billion.
“We see economic indicators improving, and believe this will further consumer confidence, ultimately allowing consumers to adjust to market conditions,” said CEO Richard Smucker.
Shares of Smucker, which had been flat on the year as of Wednesday, slumped 8.71% to $71.26.