Why This Sparkling Food Retailer Should Be Your Next Pick

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Nov 21, 2014

The overall retail environment in the U.S. is weak. Consumer spending, too, has been low, wherein it declined 0.2% in September over the previous month. Thus, the retail sector ought to feel the pinch. However, some of them continue to perform because of various strategies undertaken. Further, the food industry is such that it will never go out of vogue, despite lower consumer spending.

Therefore, companies such as J&J Snack Foods (JJSF, Financial) would continue to do well since its focus on providing customers as per their tastes and preferences helps the company grow. In fact, the retailer was able to live up to the earnings expectations in three out of last four quarters reported. It managed to register decent fourth-quarter results, enabling its share price to move north.

The numbers thereof

Driven by growth across all the categories, revenue rose 7% to $253.5 million over last year. Sales grew 6% to $919.5 million for the year. If we exclude the benefits from the acquisitions made in the last year, the top line increased 4%. The acquisitions made were New York Pretzel in October last year and Philly Swirl in May this year. Both prices and volumes increased during the year, which resulted in the increase.

Some of the bright spots during the period were the soft pretzel category, the ICEE business and the frozen beverage business, which registered significant growth. Demand for frozen beverages, especially frozen juices, was high. This resulted in a sales increase of 10% over last year.

Furthermore, the soft pretzel category resonated well with the customers. This resulted in higher sales of 14% to customers such as, schools, warehouse club stores and restaurants. One of the primary drivers for this segment was innovation. Introduction of new products such as pretzel sticks and rolls attracted more customers.

The bottom line too jumped 9% to $1.18 per share over last year’s quarter. Moreover, gross margin increased to 31.28% from 30.35% in the previous year, due to factors like higher volumes and lower input costs. Thus, the company did a commendable job of managing its profitability.

Remarkable steps undertaken

J&J Snack Foods took some commendable steps which helped it to grow. One of them was the acquisition of New York Pretzel, which was bought last year. This helped the company strengthen and expand its pretzel business.

Another significant acquisition is that of Philly Swirl in May 2014. This buyout helped in the growth of the retail supermarket segment since it specializes in frozen ice.

Moreover, addition of new products to its portfolio has been a great move by the retailer, which attracted customers and generated more demand.

The bottom line

Thus, J&J Snack Foods has been actively strategizing to strengthen its business. This resulted in better performance in the aforementioned segments. However, this segment has a lot of competitors, each trying to win customers through their own ways. In order to continue with its performance, J&J needs to actively innovate to keep customers hooked to its products. This company definitely deserves a look.