J&J Snack feels pressure of fuel, freight

MOUNT LAUREL, NJ. — J&J Snack Foods continued to make progress against the implementation of its transformation initiatives in the third quarter, but earnings and sales fell under the pressure of fuel and freight costs.

Net income at J&J Snack Foods in the third quarter ended June 27 totaled $35.33 million, equal to $1.89 per share on the common stock, down 20% from $44.25 million, or $2.26 per share, in the same period a year ago. The year-ago quarter included $10.62 million in losses on insurance proceeds received for damage to property, plant and equipment.

Meanwhile, adjusted EBITDA in the third quarter totaled $67.4 million, down from $72.03 million in the same period a year ago. The decline primarily reflected freight and fuel cost pressures, the company said.

Net sales decreased 6% to $425.96 million from $454.29 million, with more than half the decline attributed to anticipated sales reduction in bakery.

“We expect the company to return to sales growth in fiscal year 2027,” Dan Fachner, president and chief executive officer, said during an Aug. 5 conference call with analysts. “The increase in fuel and freight expenses reflects higher oil prices and significant tightening of freight markets during the quarter. Fuel costs were about in line with expectations, while freight rates rose sharply as the quarter progressed. The freight increase primarily reflects constrained capacity because of regulatory and legislation changes.

“We are pursuing steps to mitigate some of the pressure. We expanded our application of fuel surcharges during the quarter and recently increased our minimum order quantities. While we expect fuel and freight pressures to persist in our fourth quarter, diesel prices have moderated from the highs earlier in the summer.”

Foodservice operating income at J&J Snack Foods was $28.08 million, up narrowly from $27.9 million. Sales decreased 9% to $254.29 million from $277.17 million.

Fachner said the sales decline in foodservice reflected “a lot of moving parts” in the business.

“We have a major customer south of the border that has been a little bit softer this year,” Fachner said. “We continue to hope that it will come back to its normal self, but it hasn’t. The fortunate thing is it’s a lower margin business, as is the handheld business as well. And most of our handhelds go to a couple of big customers where there has been some, not direct competitor environment, but some other products added to a different area that have maybe impacted those sales slightly.”

He added that the company is seeing some great growth in churros and has a nice piece of the business that will be shipping out in the fourth quarter. Also in the fourth quarter the company expects to take advantage of “a big pretzel opportunity.”

In the retail supermarket segment in the third quarter, J&J Snack recorded operating income of $2.66 million, down 57% from $6.19 million in the same period a year ago. Sales, meanwhile, increased to $64.93 million from $63.86 million.

In the frozen beverages segment, J&J Snack posted operating income of $22.82 million, down from $23.7 million in the same period a year ago. Sales decreased to $106.74 million from $113.26 million.