SANFILIPPO JOHN B & SON INC Q3 FY2025 earnings call

• Jeffrey noted that despite a decrease in sales volume, gross profit improved and diluted earnings per share increased 50%. They are investing ~$90 million in equipment to expand domestic production capabilities by end of fiscal 2026.
• Responding to challenges: Working with customers to pass on price increases due to commodity costs, managing tariffs by seeking alternative suppliers and working with customers, and using consumer insights to adapt product portfolios.

Net sales for the third quarter of fiscal 2025 decreased 4% to $260.9 million compared to the third quarter of fiscal 2024. Gross profit increased by $6.7 million or 13.7% to $55.9 million. Third quarter gross profit margin increased to 21.4% compared to 18.1% for the third quarter fiscal 2024. Year-to-date net sales for the first three quarters of fiscal 2025 increased 5.1% to $838.2 million. Gross profit margin decreased from 20.6% to 18.5% of net sales year-to-date. Sales volume decreased in most product segments, but some segments like Contract Manufacturing had an increase.

• Planning to spend approximately $90 million on equipment to expand domestic production capabilities and improve infrastructure by end of fiscal 2026.
• Monitoring impact of tariffs on raw materials and working with customers to mitigate disruptions and pass on costs where possible.

• Macroeconomic and consumer environment challenges impacting sales volume.
• Volatile commodity costs for nuts and cocoa.
• Tariffs on imported raw materials affecting costs and supply chain.
• Changing consumer behavior and purchasing preferences.

Q: On the tariff exposure for 15%-20% raw materials, can you pass off costs to customers?

A: We focus on key commodities and customers, working to pass on tariff increases for high-volume/value items. Smaller items may be optimized.

Q: On cashews business, is it profitable?

A: Cashews and mixed nuts are profitable, but higher tariffs could impact demand.

Q: Thoughts on inventory transition and future gross margin?

A: Backing out inventory valuation impact gives indication of future gross profit per pound.

Q: On $90M spend, what's the underwriting return?

A: 10% is the hurdle rate considered for the investment.

Q: On inventory increase, cause and future sales?

A: Increase due to whip and finished goods, will sell through in Q4; also driven by higher acquisition costs of walnuts and pecans held for 9-12 months.