(Bloomberg) -- Peanut butter and jelly maker JM Smucker Co. raised its earnings guidance as its popular Uncrustables frozen sandwiches outperformed expectations, offsetting softness at the recently acquired Hostess brand.
Net sales in the company’s fiscal second quarter ended Oct. 31 were $2.3 billion, the company said in a statement Tuesday. Smucker raised the top end of its earnings per share outlook for the full fiscal year to $10.10, up 10 cents from the previous guidance.
The shares, which earlier rose as much 10%, pared the gain to 6.2% at 12:04 p.m. in New York trading. The advance pared the company’s year-to-date decline to about 4.4% so far this year, versus the 26% gain in the S&P 500 Index.
Uncrustables sales grew 16%, driven by a national advertising campaign and increased distribution. In an interview, Chief Financial Officer Marshall Tucker said growth can continue outside of traditional supermarkets, with opportunities in sporting events, universities, and convenience stores. The company also started production at a third plant in McCalla, Alabama. It now anticipates full-year sales of more than $900 million, outperforming the company’s expectations.
Tucker said Uncrustables’ success was due to its “convenience, on-the-go nature and low-to-no preparation.”
“We went through the lunch box and then we find the product in briefcases, in sports bags, in cars,” he said.
The company’s pet food brands and Cafe Bustelo coffee brand also posted sales growth, but Chief Executive Officer Mark Smucker said the company isn’t satisfied with Hostess, which he attributed to factors such as “diminished discretionary income,” underperforming distribution and the need for better in-store promotion. Smucker acquired the sweets brand last year for $5.6 billion.
The company is planning a Hostess campaign to reach Gen Z and millennial consumers and will continue evaluating the products’ ingredients to make sure the products remain appealing to shoppers, a spokesperson said.
In a note to clients, Thomas Palmer of Citi, said Smucker “was able to boost its annual outlook, despite the added sales headwinds from Hostess,” while flagging the company’s plans to roll out new displays, marketing, packaging and new products available at lower prices at Hostess.
Asked in an analyst call about the incoming Trump administration’s “Make America Healthy Again” campaign, Smucker stood firm on the strength of snacking. “As it relates to anything in the political domain, we believe very strongly that snacking continues, the trends are supportive, consumers continue to eat a couple of snacks a day,” he said.
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