SANFILIPPO JOHN B & SON INC Q2 FY2025 earnings call

• Achieved largest quarterly sales volume and highest net sales in company history, with growth across all three distribution channels.
• Fisher recipe brand had a successful holiday season, outperforming the category, and has a strong branded program complementing retailer private brands.
• Completed warehouse distribution relocation from Elgin to Huntley, IL, and started expanding production capabilities in Elgin using freed-up space.
• Focused on enhancing profitability via operational efficiencies and optimized pricing strategies.
• Category updates: Snack/trail mix up 1.5% volume and 3.4% dollars; recipe nut down 2% volume but up 4% dollars; bar category up 3% volume and 6% dollars.

Net sales for the second quarter of fiscal 2025 were $301.1 million, an increase of 3.4% compared to the prior-year quarter. Sales volume grew by 7.1%, driven by lower-priced bars, granola, and private brand recipe nuts. In the consumer distribution channel, sales volume increased 2.9%, with private brand sales volume up 4%, including a 27.6% growth in bars volume from a mass retailer. Branded products (including Fisher recipe nuts, etc.) saw a 3.4% increase in sales volume, with Fisher recipe nuts up 3.8% due to increased merchandising. The commercial ingredients distribution channel had a 1.4% sales volume increase, and the contract manufacturing channel saw a 55.6% increase but was offset by some lost business. Year-to-date net sales for the first two quarters of fiscal 2025 were $577.3 million, a 9.9% increase from the prior year.

• Pricing adjustments for all brands and private brand customers took effect in Q3, with most to be implemented in January and February.
• Aim to improve margins through cost optimization and operational efficiencies, with margin enhancement expected from cost reduction initiatives and pricing adjustments.

• Competitive pricing pressure negatively impacting average selling prices.
• Elevated input costs for commodities like chocolate, walnuts, and almonds.
• Potential impact of tariffs on supply chains from Mexico and other regions.

Q: Further detail on pricing environment and margin recovery A: Jeffrey mentions commodity cost increases, 6-month pricing reviews, and competitive pressure; Frank states the goal to return to historical gross margin averages over the next several quarters Q: On brands losing share and sustainability A: Jeffrey says brands may invest in the category, it's hard to predict price adjustments, and the focus is on cost reduction Q: Lakeville costs and impact A: Jasper mentions capitalizing costs of new lines, overtime in the Lakeville facility, and anticipates profitability improvement there Q: Lakeville dollar value in the quarter A: Frank states Lakeville-related sales for the quarter were around $40 million Q: Thoughts on tariffs affecting pecan business from Mexico A: Jasper says almost done buying current crop; Jeffrey mentions procurement teams are monitoring and preparing for potential tariffs