J.M. Smucker's Latest Earnings Reveal Just How Hard The Jif Peanut Butter Recall Hit
The Jif recall earlier this year had far-reaching ramifications, as over the course of a month — from May 21 through June 21, 2022 — the U.S. Food and Drug Administration (FDA) announced no less than 20 separate food recalls stemming from a salmonella outbreak caused by peanut butter made in a Lexington, Kentucky manufacturing facility. That facility was operated by The J.M. Smucker Company, Jif's parent company. Twenty-one people became sick across 17 U.S. states as a result, according to the U.S. Centers for Disease Control and Prevention (CDC), four of whom had to be hospitalized.
Jif voluntarily recalled 49 of its own peanut butter products because of the salmonella outbreak. But because so many other companies used Jif in their own food products, the recall list eventually grew much larger. As the FDA confirmed, chocolate companies such as Euphoria, Wilbur, and Coblentz were all affected as were retail outlets like Walmart and Albertsons, and convenience stores like Circle K and 7-Eleven.
But Jif was hurt the worst. When the annual earnings for The J.M. Smucker Company were announced in early June 2022 — in the midst of the many Jif peanut butter recalls -– the company admitted it was expecting the fallout to cost them in the neighborhood of $125 million dollars (via PR Newswire). With the recent release of J.M. Smucker's first quarter earnings report for the new fiscal year, it's now possible to assess just how accurate that estimate proved to be.
Assessing the real damage from the Jif recalls
At first glance, The J.M. Smucker Company seems to have weathered the recall storm quite well. Net sales were actually up by 1%, or $15 million dollars, according to the company's PR Newswire press release which announced the company's first quarter earnings for the 2023 fiscal year. Not only that, J.M. Smucker saw big net sales jumps in several of its corporate sectors: Retail coffee sales were up 10%, for example, while retail pet food sales spiked 13%.
"Our first quarter results reflect a strong start to the fiscal year, demonstrating our operational excellence and strength of our strategy. Our teams have done outstanding work to manage headwinds from cost inflation, industry-wide supply chain challenges, and the Jif peanut butter recall," noted Mark Smucker, the J.M. Smucker Company's CEO and chairman of the board, in the press release.
Of course, gains in other corporate sectors were necessary to help offset the damage done by the Jif recalls. As the press release notes, damage was indeed done. Food sales on a net basis were down $124.5 million; an uncannily accurate number relative to earlier estimates if, indeed, the Jif recalls were the sole reason given. But that wasn't the case. The $63.9 million decline in food sector profits, however, was largely attributed to the peanut butter recalls. Adjusted earnings per share for J.M. Smucker also took a hit, dropping 12% to $1.67, a downgrade attributable in large part to the Jif recalls.