J&J SNACK FOODS CORP Q1 FY2025 earnings call

• Top line growth: 4.1% growth to $362.6M driven by volume and pricing, but impacted by sales mix and input costs. - Gross margin: Declined to 25.9% from 27.2% due to input cost inflation not fully offset by price, unfavorable mix, and seasonal business loss. - Pricing: Implemented price increases, with more in Q2, but not fully offset input costs (chocolates, eggs up, flour/dairy down). - Operational initiatives: Added 3 new RDCs, supply chain improved with 94% of sales shipped from new network, inventory levels lowered. - Marketing: Invested in digital/shopper marketing, Dippin' Dots rollout to theaters (186 locations added), Retail launch of Dippin' Dots Sundays. - Stock repurchase: Board approved $50M stock repurchase authorization.

Food Service segment saw 4.5% sales growth, with Soft Pretzels up 4.8%, Frozen Novelties up 9.8% (8.4% in Dippin’ Dots), Churro sales down 9.2%, and Bakery sales up 6.6%. Retail segment had 2.2% sales growth, with Frozen Novelties up meaningfully (LUIGI’S and Dogsters), Soft Pretzel sales down 7.4% due to ordering system issue, and Frozen Beverage sales up 4% (10% volume increase in theater channels). Frozen Beverage achieved record first quarter results despite peso headwinds, with theater traffic rebound helping, though Mexico business was impacted by peso weakness.

• Top line: Expect continued growth from price and volume. - Gross margin: Aim to get back to low 30% range, with Q2 transitional, expecting improvement in back half. - Pricing: Additional price increases implemented in Q2 (4% in frozen beverage, 3% in Dippin’ Dots).

• Input cost inflation: Chocolates, eggs, proteins saw significant inflation, not fully offset by price. - Sales mix: Unfavorable mix from loss of seasonal bakery business, lower churro volumes in Food Service. - Foreign exchange: Peso weakness impacted Frozen Beverage performance in Mexico. - Competitive pressures: Lost bakery business bids due to competitive pressure.

Q: Could you provide a gross margin bridge for the decline year-over-year, parsing out commodity-related, base-related, and mix-related?

A: Shawn explains about 80 basis points from pricing gap relative to input costs, balance from mix loss in bakery business, and peso impact.

Q: With consumer in a fragile but stable place, worry about pricing pass-through and volume response?

A: Dan and Shawn discuss watching consumer response closely, needing to pass on price increases as industry-wide, and selective pricing implementation.

Q: How much did the peso impact profitability for the frozen beverage?

A: Shawn states peso impact was close to a million dollars, with peso weakening ~20% vs prior year.

Q: On convenience store channel, gross margin outlook, Dippin' Dots retail, and stock repurchase?

A: Dan discusses convenience store recovery, Shawn talks about gross margin aiming for low 30% range, Dippin' Dots retail launch with good acceptance, and stock repurchase as part of capital deployment strategy.