John B. Sanfilippo & Son (JBSS) — a processor and distributor of nuts — reported better-than-expected quarterly results, explains Taesik Yoon, growth stock expert and editor of Forbes Investor.
Specifically, sales volume in its Commercial Ingredients distribution channel slid 27.7% due to a 40.9% drop in volume for almond, peanut, walnut, sunflower and pecan products resulting from the COVID-19-related decline in air travel and nationwide restrictions on occupancy rates in and closures of restaurants.
In addition, Contract Packaging distribution channel sales volume was 12.2% lower from the unfavorable impact of reduced convenience store foot traffic on one of JBSS’s customer’s business as a result of the pandemic and the loss of peanut butter with another customer due to a temporary peanut supply shortage.
However, a 3.8% increase in sales volume in the company’s much larger Consumer distribution channel (accounted for 75.8% of total volume) limited the year-over-year decline in total volume and fiscal 2021 Q1 net sales to just 3.5% to $210.3 million, which was $2.7 million ahead of expectations.
Further aided by reductions in advertising, compensation and consulting expenses, earnings per share of $1.11 nearly matched the record $1.12 reported in last year’s Q1 and came in a dime above of the $1.01 consensus estimate.
What’s more, while the ongoing trend of people doing more cooking and baking at home continues to have a favorable impact on volumes in its Consumer business.
And regardless of how consumption and demand levels evolve from here, its diversification across these three distribution channels continues to put JBSS in strong position to follow and profit from these shifts wherever they may go.
Combined with the decrease in acquisition costs its procurement teams have seen for walnuts and almonds for the 2020 crop year (which falls into the current 2021 fiscal year) and the fact that peanut prices are relatively flat versus last year, JBSS expects acquisition costs to decline or remain stable for all other major tree nuts.
This has us remaining optimistic that a return to top and bottom-line growth may not be too far off. In fact, the only thing we find disappointing about this report is that JBSS’s stock wasn’t up based on it.
