Pennsauken / NJ. (jj) J+J Snack Foods Corporation reported financial results for the fourth quarter and full year ended September 25, 2021. President and CEO Dan Fachner: «We are pleased with the strong finish to the year and the positive trends we see across our business, including exceeding pre-Covid sales levels in the fourth quarter despite an incredibly challenging operating environment. While fiscal 2019 was one of our strongest years, our net sales for Q4/2021 increased 4 percent, compared to the same period in fiscal 2019, driven by a 6 percent increase in our Food Service segment and 29 percent growth in our Retail segment as traffic across many of our customers’ venues and outlets continues to rebound. Our Frozen Beverages segment also continues to improve, with sales down 12 percent in the fourth quarter, compared to fiscal 2019, which also reflects quarterly sequential momentum from this segment relative to the comparison between Q3 ’21 and Q3 ’19. Despite the marked variance between channels experiencing recoveries such as restaurant, amusement, retail and convenience, and slower recovery channels such as theaters, the team is doing a great job balancing initiatives to drive growth and create more effective and efficient operational processes.»
«Our focus on efficiencies, combined with success in managing the business through these challenging times, is reflected in 28 percent top-line growth, which led to robust year-over-year net earnings growth of 187 percent and 204 percent for the fourth quarter and full year, respectively. While the top and bottom line results are strong, we see opportunities for further upside, as at present, we continue to experience margin pressures brought on by rising costs across the supply chain, including commodities, logistics and wages. To offset these inflationary pressures, we have undertaken a number of pricing actions, which in combination with cost savings initiatives, will help drive margin improvements as the impact of these operational pressures and the benefits of our actions align.»
«As we look to fiscal 2022, we are confident that our unwavering dedication to serve our customers and manage our business in the most effective and efficient way possible will allow us to successfully navigate short-term challenges and further JJSF’s position as a leader in the growing snack foods segment. Our proven business model and long history of results highlights our ability to effectively leverage our core brands, bring further product innovation to market and drive new availability while continuing to focus on the customer experience and creating additional value for our employees, partners and shareholders.»
Total Company Fourth Quarter Highlights
Net sales increased 28 percent to USD 323.1 million in Q4 of fiscal 2021, compared to Q4 of fiscal 2020, and by 4 percent, compared to Q4 of fiscal 2019. Key highlights include:
- Sales were driven by growth in core products, including soft pretzels, churros, bakery and frozen beverages, as well as the continued success of our chicken bake handheld recently introduced into the Club channel.
- Food Service sales exceeded Q4/2020 by 35 percent, and surpassed Q4/2019 by 6 percent.
- Retail segment sales were 9 percent below Q4/2020 when sales grew 41 percent benefiting from consumers being home during the pandemic. However, retail sales remained strong compared to pre-pandemic Q4/2019 levels, growing 29 percent.
- Frozen Beverage segment sales beat Q4/2020 sales by 46 percent, led by frozen beverages growing over 104 percent; frozen beverage sales improved to just 4 percent below Q4/2019 levels led by strong growth across restaurant, convenience, and amusement channels, partially offset by a slower recovery across our theater customers.
Gross profit as a percentage of sales was 28.4 percent in Q4/2021, compared to 21.4 percent in Q4/2020, reflecting the operating leverage benefit of increased sales, favourable product mix and corresponding margin efficiencies.
Total operating expenses were 20.6 percent of sales for the quarter, an increase of 80 bps, compared to Q4/2020. Expenses were negatively impacted by industry-wide freight and distribution cost increases. Distribution costs were 10.1 percent of sales in the quarter, an increase of 90 bps versus the prior year period, while marketing and selling expenses were 6.5 percent of sales, or flat, compared to Q4 ‘20. Administrative expenses were 3.6 percent of sales in Q4/2021, compared to 3.4 percent in Q4/2020.
Operating income was USD 25.3 million in the fourth quarter of fiscal 2021, compared to USD 3.9 million in the prior year period, largely reflecting the operating leverage in our model and the aforementioned items. Net earnings in Q4 ‘21 increased to USD 18.9 million, compared to USD 6.6 million in Q4/2020. Our effective tax rate was 26 percent in Q4 ‘21.
Total Company Fiscal 2021 Highlights
Net sales increased 12 percent to USD 1,145 million for full year fiscal 2021, versus full year fiscal 2020, as performance in the last two quarters of the year returned to pre-Covid levels. Key highlights include:
- Food Service sales grew 17 percent in fiscal 2021, compared to the prior year, led by soft pretzels, churros, handhelds and bakery.
- Retail sales continued their strong performance growing 4 percent, following 23 percent growth in this segment in fiscal 2020. This growth was driven by soft pretzels and our frozen novelties business.
- Frozen Beverages segment sales grew 4 percent as key amusement, convenience, restaurants, and retail venues returned to pre-Covid capacity in the second half of the year offsetting a slower recovery in the theater channel.
Gross profit as a percentage of sales improved to 26.1 percent for fiscal 2021, compared to 23.3 percent for the prior year, with the increase largely attributable to the benefit of increased demand, favourable product mix and corresponding margin efficiencies.
Total operating expenses improved to 19.9 percent of sales, compared to 21.6 percent for fiscal 2020 reflecting the alignment of expenses with the post-pandemic sales recovery. Expenses were negatively impacted by industry-wide freight and distribution cost increases. Distribution cost were 9.5 percent of sales for the year, 40 bps higher than the prior year. Marketing and selling expenses were 6.8 percent of sales, compared to 8.3 percent last year, driven by effective investment of marketing dollars aligned with sales recovery. Administrative expenses were 3.5 percent of sales this year, compared to 3.6 percent last year.
Fiscal 2021 operating income improved to USD 71.2 million, compared to USD 17.2 million for fiscal 2020, largely as the result of the aforementioned items.
Fiscal 2021 net earnings increased over 200 percent to USD 55.6 million, compared to USD 18.3 million in fiscal 2020. Our effective tax rate was 25 percent in fiscal 2021.
Food Service Segment Fourth Quarter Highlights
- Q4/2021 food service sales exceeded Q4/2020 by 35 percent and surpassed Q4/2019 sales by 6 percent.
- Customer venues across sports, amusement, convenience, schools and restaurants are experiencing a surge in post pandemic demand driving strong sales in our core products, including 62 percent increase in soft pretzel sales to USD 54.6 million, 39 percent increase in frozen juices and ices sales to USD 13.8 million, churro sales growth of 121 percent to USD 18.6 million led by customer expansion and growing menu penetration, bakery sales growth of 10 percent to USD 85.0 million, and, handheld sales growth of 36 percent led by the recent introduction of chicken bake products.
- Sales of new products increased to USD 5.5 million led by the introduction of chicken bake items and to a lesser degree by a new cookie product under the Honolulu Cookie Company brand.
- Q4/2021 operating income increased by USD 10.6 million to USD 9.3 million driven by strong sales and improved product mix that helped leverage cost of goods and operating expenses.
Retail Segment Fourth Quarter Highlights
- Q4/2021 retail sales decreased 9 percent, compared to Q4/2020, and grew 29 percent versus Q4/2019 sales. Q4/2020 sales benefited from consumers eating more at home during the throes of the Covid-19 pandemic.
- Soft pretzels declined 1 percent, compared to Q4/2020, while sales almost doubled as compared to Q4/2019 led by our SuperPretzel core product and growing pretzel bites volume. Frozen juices and ices sales decreased 3 percent, however were 32 percent higher than the same quarter in fiscal 2019 aided by wider distribution for Luigi’s, Whole Fruit, Dogsters, Icee and Minute Maid brands. Biscuit sales declined 16 percent in the quarter.
- Operating income declined USD 3.0 million driven by lower sales, however delivered strong operating margins of 12 percent as we cycled the peak retail performance in a challenging cost environment during Q4/2020 when consumers were less mobile. Operating income is USD 4 million higher than pre-Covid Q4 19.
Frozen Beverages Segment Fourth Quarter Highlights
- Frozen beverage segment sales beat Q4/2020 sales by 46 percent led by beverage sales.
- Beverage sales grew over 100 percent, USD 24.4 million higher than in Q4/2020 and 4 percent below Q4/2019 reflecting the growing momentum across amusement, convenience, and restaurant channels.
- Fiscal 2021 saw the launch with Krystal Hamburgers and innovation through products such as Icee Desserts at Golden Corral helping offset slower recovery in the theater channel.
- Service revenues declined 2 percent and equipment sales declined 5 percent driven mainly by the lagging theater industry.
- Operating income increased USD 13.7 million as strong sales drove leverage across the business.