J&J Snack Foods (NASDAQ:JJSF) Posts Better-Than-Expected Sales In Q4
Snack food company J&J Snack Foods (NASDAQ:JJSF) beat analysts' expectations in Q4 FY2023, with revenue up 10.8% year on year to $443.9 million. Turning to EPS, J&J Snack Foods made a GAAP profit of $1.57 per share, improving from its profit of $0.90 per share in the same quarter last year.
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J&J Snack Foods (JJSF) Q4 FY2023 Highlights:
Revenue: $443.9 million vs analyst estimates of $421 million (5.4% beat)
EPS: $1.57 vs analyst expectations of $1.70 (7.4% miss)
Free Cash Flow of $38.07 million, down 11.3% from the previous quarter
Gross Margin (GAAP): 32.8%, up from 28.9% in the same quarter last year
Dan Fachner, J&J Snack Foods President and CEO, commented, “J&J Snack Foods ended fiscal 2023 on a strong note, including record sales and profitability for both the fourth quarter and full year. We achieved these results through the dedicated efforts of our J&J employees across the business, as well as the positive impact of various operational and strategic initiatives we have undertaken over the past two years. Fiscal fourth quarter net sales increased to a record $443.9 million, driven by Food Services sales growth of 5.3%, Retail segment sales growth of 21.2% and Frozen Beverages sales growth of 20.6%. In addition, our work to improve profit margins continues to gain momentum led by a 32.8% gross margin in the quarter and lower distribution expenses. Operating income and adjusted EBITDA increased 93.0% and 55.2%, respectively, for the fourth quarter and 77.2% and 46.3%, respectively for fiscal 2023.
Best known for its SuperPretzel soft pretzels and ICEE frozen drinks, J&J Snack Foods (NASDAQ:JJSF) produces a range of snacks and beverages and distributes them primarily to supermarket and food service customers.
Packaged Food
As America industrialized and moved away from an agricultural economy, people faced more demands on their time. Packaged foods emerged as a solution offering convenience to the evolving American family, whether it be canned goods, prepared meals, or snacks. Today, Americans seek brands that are high in quality, reliable, and reasonably priced. Furthermore, there's a growing emphasis on health-conscious and sustainable food options. Packaged food stocks are considered resilient investments. People always need to eat, so these companies can enjoy consistent demand as long as they stay on top of changing consumer preferences. The industry spans from multinational corporations to smaller specialized firms and is subject to food safety and labeling regulations.
Sales Growth
J&J Snack Foods is larger than most consumer staples companies and benefits from economies of scale, giving it an edge over its smaller competitors.
As you can see below, the company's annualized revenue growth rate of 15.1% over the last three years was excellent for a consumer staples business.
This quarter, J&J Snack Foods reported robust year-on-year revenue growth of 10.8%, and its $443.9 million in revenue exceeded Wall Street's estimates by 5.4%.
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Operating Margin
Operating margin is an important measure of profitability accounting for key expenses such as marketing and advertising, IT systems, wages, and other administrative costs.
This quarter, J&J Snack Foods generated an operating profit margin of 9.4%, up 3.7 percentage points year on year. This increase was encouraging, and we can infer J&J Snack Foods had stronger pricing power and lower raw materials/transportation costs because its gross margin expanded more than its operating margin.
Zooming out, J&J Snack Foods has done a decent job managing its expenses over the last eight quarters. The company has produced an average operating margin of 5.5%, higher than the broader consumer staples sector. On top of that, its margin has risen by 2.3 percentage points on average each year, showing the company is improving its fundamentals.
The company's operating profitability was particularly impressive because of its low gross margin, which is mostly a factor of what it sells and takes tectonic shifts to move meaningfully. Companies have more control over their operating margins, and it signals strength if they're high when gross margins are low (like for J&J Snack Foods).
Key Takeaways from J&J Snack Foods's Q4 Results
With a market capitalization of $3.16 billion, J&J Snack Foods is among smaller companies, but its $49.58 million cash balance and positive free cash flow over the last 12 months give us confidence that it has the resources needed to pursue a high-growth business strategy.
We were impressed by how significantly J&J Snack Foods blew past analysts' revenue expectations this quarter, driven by strong performance from its recently acquired Dippin' Dots brand. We were also happy its gross margin narrowly outperformed Wall Street's estimates. On the other hand, its operating margin and EPS missed analysts' expectations. Overall, the results could have been better. We would have liked to see greater GAAP profitability The stock is flat after reporting and currently trades at $160.86 per share.
So should you invest in J&J Snack Foods right now? When making that decision, it's important to consider its valuation, business qualities, as well as what has happened in the latest quarter. We cover that in our actionable full research report which you can read here, it's free.
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The author has no position in any of the stocks mentioned in this report.
