John B. Sanfilippo & Son Q3 2025 Earnings Report

John B. Sanfilippo & Son EPS Results

• Actual EPS: $1.72
• Consensus EPS: N/A
• Beat/Miss: N/A
• One Year Ago EPS: N/A

John B. Sanfilippo & Son Revenue Results

• Actual Revenue: $260.91 million
• Expected Revenue: N/A
• Beat/Miss: N/A
• YoY Revenue Growth: N/A

John B. Sanfilippo & Son Announcement Details

• Quarter: Q3 2025
• Date: 4/30/2025
• Time: After Market Closes
• Conference Call Date: Thursday, May 1, 2025
• Conference Call Time: 10:00AM ET

John B. Sanfilippo & Son (NASDAQ:JBSS) is a family‐held processor and marketer of tree nuts and snack nut products. Headquartered in Elgin, Illinois, the company operates manufacturing facilities, processing plants and sales offices across the United States and abroad. It supplies a broad range of channels, including retail, foodservice, industrial and private‐label customers.

The company’s product portfolio spans in‐shell and shelled pecans, walnuts, almonds, cashews, pistachios and peanuts, as well as mixed‐nut blends, chocolate‐covered treats, granolas and specialty snack items. Branded offerings include Fisher®, Orchard Valley Harvest® and Squirrel Brand®, each positioned to meet varied consumer preferences for quality, flavor and convenience.

John B. Sanfilippo & Son maintains an integrated supply chain that extends from orchard management and procurement through roasting, packaging and distribution. Outside the United States, the company serves markets in Europe, Asia‐Pacific and Latin America through sales offices and partner networks, enabling it to deliver both branded and private‐label nut products to more than 80 countries worldwide.

Founded in 1922 by John B. Sanfilippo in the Chicago suburbs, the business remains under family leadership. John H. Sanfilippo serves as chairman and chief executive officer, continuing a multi‐generational commitment to quality, food safety and innovation in the tree nut industry. The company emphasizes sustainable sourcing practices and invests in processing technologies to support long‐term growth and customer service excellence.

John B. Sanfilippo & Son Q3 2025 Earnings Call Transcript

Key Takeaways

• Despite a 7.9% drop in sales volume, the company delivered a 13.7% rise in gross profit and a 50% increase in diluted EPS through cost controls and pricing alignment.
• Management announced a historic $90 million investment in U.S. production equipment and infrastructure by the end of FY 2026 to expand capacity and improve efficiency.
• Rising commodity acquisition costs and potential 10%–140% tariffs on imports (cashews, pepitas, pine nuts, macadamias) pose margin pressure and risk demand contraction.
• Gross profit margin improved to 21.4% from 18.1% year-over-year, driven by inventory valuation gains and manufacturing efficiencies, though these benefits may not recur.
• Sales volumes fell across consumer and branded channels (9.2% and 12.9% declines respectively), while contract manufacturing grew 6% on increased granola and opportunistic customer sales.

Presentation

[Operator]

Thank you for standing by. My name is Gail , and I will be your operator for today's call. At this time, I would like to welcome each and every one of you to the John B. Sanfilippo & Son Third Quarter Fiscal Year 2025 Operating Results Conference Call. All lines have been placed on mute to prevent any background noise. After the speaker's remarks, there will be a question and answer session. If you would like to ask a question during this time, simply press star followed by the number one on your telephone keypad. If you would like to withdraw your question, kindly press star one again. It is now my pleasure to turn today's call over to John B. Sanfilippo & Son Chief Executive Officer, Jeffrey Sanfilippo. Please go ahead.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Thank you, Gail . Good morning, everyone, and welcome to our 2025 Third Quarter Earnings Conference Call. We appreciate you joining us. On the call with me today is Frank Pellegrino, our CFO. We may make some forward-looking statements today. These statements are based on our current expectations and may involve certain risks and uncertainties. The factors that could negatively impact results are explained in the various SEC filings that we have made, including Forms 10-K and 10-Q. We encourage you to refer to the filings to learn more about these risks and uncertainties that are inherent in our business. I'm encouraged to share the positive results and improvements we've made in our financial performance this quarter. Although we saw a decrease in sales volume during the third quarter, we improved our gross profit and achieved a 50% increase in diluted earnings per share.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

This was driven by, among other things, strategically controlling our costs and the continued alignment of our selling prices with increasing commodity acquisition costs. When we exclude the impact of inventory valuation on the current quarter's gross profit, there is a modest sequential improvement. Like other snack food companies, our third quarter performance was impacted by a challenging macroeconomic and consumer environment. The sales volume decline, coupled with the risk of additional declines due to rising retail selling prices and changing consumer behavior, underscores our strategic priority to execute on our long-range plan and adapt our strategies to meet evolving customer needs. To support this, we are committed to investing in our future growth, planning to spend approximately $90 million on equipment to expand our domestic production capabilities and improve our related infrastructure by the end of fiscal 2026. This historic investment in production equipment and infrastructure in our U.S.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Facilities reflects our confidence in domestic manufacturing. There is a great deal of uncertainty in the market, with macroeconomic factors out of our control that may have an impact on our business. There is so much that we can control within our company to drive efficiencies, deliver innovation, differentiate our products and services, and optimize our cost structure. The investments we are making demonstrate our commitment to growing our business, being a more valued partner to our customers, and providing more job opportunities for the dedicated team members throughout our organization. I would like to thank all our employees who have worked with passion, dedication, and a sense of urgency to manage our business through these challenging times.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

As we face several headwinds impacting the demand for nuts, trail mixes, and bars, let me share how our company is responding to mitigate negative impacts on our business while investing in growth. First, there are higher commodity costs for most nuts we procure, including almonds, walnuts, pecans, and cashews, due to supply and demand volatility. The cocoa market has continued to stay at almost record prices. We are having difficult discussions with our customers to pass on necessary price increases. At the same time, we are offering options to change product formulas, pack sizes, and product mixes to mitigate these cost increases. Second, the impact of tariffs: actual pending implementation or threatened by the U.S. government or other governments on our costs and supply chain. There are items such as cashews, pepitas, pine nuts, and macadamias that do not grow in the U.S. or have little production here.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Most of these items are incurring a 10% tariff today, with other products incurring over a 140% tariff. We are working very closely with our major customers to define the financial impact of these costs on their finished products and deciding how best to manage purchases, inventories, and potential demand destruction. Our procurement team is doing an extraordinary job looking for alternative suppliers where possible to mitigate supply chain disruptions. Third, changing industry trends as consumers' purchasing preferences evolve. There are so many factors impacting consumers today, including inflation, economic volatility, health and wellness, reduced government support through programs such as SNAP, or a variety of other macroeconomic reasons. Even where and how consumers get their information about food has dramatically shifted.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

JBSS has invested heavily in a robust consumer insights team to track consumption, monitor consumer behavior, and assess price elasticity models, and recommend opportunities for our retail partner to optimize their portfolios with the right products, prices, and promotions. These same recommendations from our consumer insights team are also being applied to our brand portfolio, including Fisher Snack, Fisher Recipe, and our Orchard Valley Harvest brand. It is a difficult environment for most brands across the snack category, as consumers have tightened their wallets due to current inflationary pressures. We continue to focus on expanding distribution, building brand awareness and trial with innovative marketing programs, and allocating a portion of the sales to support our partner, Conscious Alliance, to help end child hunger. I will now turn the call over to Frank to discuss our financial performance.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

Thank you, Jeffrey. Starting with the income statement, net sales for the third quarter of fiscal 2025 decreased 4% to $260.9 million, compared to net sales of $271.9 million for the third quarter of fiscal 2024. The decrease in net sales was due to a 7.9% decrease in sales volume, or pounds sold to customers, which was partially offset by a 4.2% increase in the weighted average sales price per pound. The increase in the weighted average selling price primarily resulted from higher commodity acquisition costs for all major tree nuts. Sales volume declined substantially for all major product types in the third quarter. Sales volume decreased 9.2% in the consumer distribution channel, primarily due to an 8.3% decrease in private brand sales volume.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

The private brand volume decrease was due to a 16% reduction in bars volume, mainly due to reduced sales to a mass merchandising retailer, following an increase in bar sales from a national brand recall in the third quarter of fiscal 2024. Our strategic decision to reduce sales to a grocery retailer and lost distribution in our grocery retailer further contributed to the decline in bars volume. Additionally, decreases in sales of almonds, snack nuts, and trail mix caused by higher retail prices and the discontinuation of peanut butter at the same mass merchandising retailer contributed to the overall reduction in sales volume. These declines were partially mitigated by increased sales of walnuts and pecans at the same retailer, along with new distribution at two grocery store customers.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

Sales volume decreased 12.9% for our branded products, primarily driven by a 33.8% reduction in Orchard Valley Harvest sales, mainly due to delayed orders from a major customer in the non-food sector. Sales volume decreased 8.3% in the commercial ingredients distribution channel, mainly driven by decreased sales volume due to competitive pricing pressures and decreased food service peanut butter sales. Sales volume increased 6% in the contract manufacturing distribution channel, primarily due to increased granola volume processed in our Lakeville facility. Sales to new customers and opportunistic sales to current customers also contributed to the overall increase. These gains were significantly offset by reduced peanut sales volume to a major customer due to soft consumer demand.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

Gross profit increased by $6.7 million, or 13.7%, to $55.9 million, compared to the third quarter of last year, driven by inventory valuation adjustments that we anticipated, driven by rising commodity input costs, which may not recur next quarter. The inventory valuation adjustment was primarily driven by a transition from a lower cost to a higher cost crop year for walnuts and pecans. To a lesser extent, gross profit benefited from favorable manufacturing efficiencies. These gains were partially offset by higher commodity acquisition costs for all major tree nuts. Third quarter gross profit margin as percentage of net sales increased to 21.4%, compared to 18.1% for the third quarter of fiscal 2024, due to the reasons previously mentioned.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

Total operating expenses for the third quarter decreased $3.1 million compared to prior quarter, mainly due to reduction in incentive compensation expense, which was partially offset by an increase in rent expense from our new Huntley, Illinois facility. Total operating expenses for the third quarter of 2025 decreased to 10.6% of net sales from 11.3% for last year's third quarter, due to the reasons previously mentioned and was partially offset by a lower net sales base. Interest expense was $1.1 million for the third quarter of fiscal 2025, compared to $800,000 for the third quarter of fiscal 2024. Net income for the third quarter of fiscal 2025 was $20.2 million, or $1.72 per diluted share, compared to $13.5 million, or $1.15 per diluted share for the third quarter of fiscal 2024. Now, taking a look at inventory.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

The total value of inventories on hand at the end of the current third quarter increased $47.1 million, or 22.4%, compared to the total value of inventories on hand at the end of the prior year comparable quarter. The increase was mainly due to higher quantities and costs of finished goods, work in process, and almonds, as well as higher commodity acquisition costs for walnuts and pecans. The weighted average cost per pound of raw nut and dried fruit increased 33.9% year-over-year, mainly due to higher commodity acquisition costs for almost all major tree nuts. Moving on to year-to-date results. Net sales for the first three quarters of fiscal 2025 increased 5.1% to $838.2 million, compared to the first three quarters of fiscal 2024. Excluding the 2025 first quarter impact to Lakeville acquisition, net sales remained relatively unchanged, rising slightly from $792.2 million to $797.7 million.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

Sales volume increased 6.7%, primarily due to the Lakeville acquisition. Excluding the impact of the Lakeville acquisition, sales volume remained relatively unchanged. Gross profit margin decreased from 20.6% to 18.5% of net sales. The decrease was mainly attributable to increased commodity acquisition costs for substantially all major nuts, as well as competitive pricing pressures and strategic pricing decisions, which were offset by factors cited previously and improved profitability on bars due to manufacturing efficiencies. Total operating expenses for the current year to date decreased by $3.5 million to $90.1 million, compared to $93.6 million for the first three quarters of fiscal 2024. The decrease in total operating expenses was mainly driven by decreases in incentive compensation, advertising, and consumer insight expenses.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

These decreases were partially offset by a one-time bargain purchase gain from the Lakeville acquisition, which did not repeat in the current year-to-date period, as well as increases in salary and wages, freight, and rent expenses. Interest expense was $2.3 million for the first three quarters of fiscal 2025 and $2.1 million for the first three quarters of fiscal 2024. Net income for the first three quarters of fiscal 2025 was $45.4 million or $3.87 per diluted share, compared to net income of $50.2 million or $4.30 per diluted share for the first three quarters of fiscal 2024. Please refer to our 10-Q for additional details regarding our financial performance for the third quarter of fiscal 2025. Now, I will turn the call over to Jeffrey to provide additional comments on our operating results for the third quarter of fiscal 2025 and discuss category trends.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Thanks, Frank. Turning to category updates, I'll share the category and brand results for the quarter. All the market information I'll Circana panel data, and for today, it is the period ending March 30, 2025. When I refer to Q3, I'm referring to 13 weeks of the quarter ending March 30, 2025. References to changes in volume are versus the corresponding period one year ago. For pricing commentary, we are using scanned data from Circana, which includes food, drug, mass, Walmart, military, and other outlets, and we are referring to average price per pound. We are using the nut, trail mix, and bars syndicated views of the category as defined by Circana. In the latest quarter, we continue to see modest growth in the broader snack aisle, as defined by Circana. Volume and dollars were up 2% and 3%, respectively.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

This is consistent with the performance we saw in Q2. In Q3, the snack, nut, and trail mix category was down 2% in pounds and up 2% in dollars, as we saw prices start to rise. This is slightly worse volume performance than we saw in Q2, but similar dollar performance. We saw prices rise 2% in snack nuts and 3% in trail mixes, with almonds, mixed nuts, and pistachios all showing higher prices. Fisher Snack and trail mix performed worse than the category, with pound shipments down 17%. This was driven primarily by declines at a major specialty retailer due to inventory changes and not repeating a promotion. On Southern Style Nuts brand, pound shipments increased 10%, driven primarily by velocity growth in mass and e-commerce.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Orchard Valley Harvest brand, which primarily plays in trail mix, was down 34% in pound shipments, driven by delayed orders from a specialty retailer. Excluding that customer, pound shipments were actually up 11%, with strong growth in club and e-commerce. Commodity increases, including cocoa and some tree nuts, are resulting in higher prices for Orchard Valley Harvest. We continue to focus on innovation and cost savings opportunities to mitigate this significant commodity pressure. Our private label consumer snack and trail shipments performed relatively in line with the category, with pound shipments down 3% versus last year. Now, let me turn to the recipe nut category. In Q3, the recipe nut category was down 1% in pounds and up 10% in dollars, as prices for both walnuts and pecans continued to increase. This is an improvement in dollar performance and relatively stable volume performance versus Q2.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Our Fisher recipe pound shipments were down 3% in Q3, with volume softness tied to increased costs of our commodities. Now, let's switch over to the bar category. In Q3, the bars category continued to rebound as a major player continued to re-enter the market after a recall last winter. The category grew 6% in pounds and 8% in dollars. Private label was down 1% in pounds and up 2% in dollars, as the previously mentioned national brand retook some of the share it lost to private label last year. Our private label bar shipments were down 16% versus a year ago, as we lapped significant growth after filling empty shelves because of the national brand recall. In closing, as we look ahead, maintaining agility and swiftly adapting to the dynamic external environment is imperative to our business.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

We continue to monitor the impact and timing of import tariffs on internationally sourced items, which represent approximately 15%-20% of all our raw material purchases. As I mentioned, items such as cashews and pepitas do not grow in the United States, and we are proactively working with strategic suppliers to quantify the potential impact of tariffs and develop solutions to manage cost increases while ensuring minimal disruptions to our supply chain. Additionally, we are collaborating closely with customers to assess the impact of tariffs on retail selling prices and consumer demand, and to identify solutions to attempt to mitigate that impact. Furthermore, we will continue to rigorously pursue opportunities to enhance internal efficiencies and drive long-term shareholder value. I am confident in the strategic investments we have made in our people, customers, and capabilities to overcome these challenges and deliver strong operating results.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Our company and our team of dedicated leaders and associates throughout the organization remain steadfast and strong. We have always adapted quickly to overcome headwinds. In our insights, innovation, R&D, marketing, sales, operation, and finance teams across the organization are focused on consumer behavior, consumption trends to develop new products, pursue new opportunities, and manage our financial performance and inventory levels. We have the right strategies, talent, and commitment to quality and service to continue to grow and provide exceptional value for our customers and our consumers. We appreciate your participation in the call, and thank you for your interest in our company. I will now turn the call back over to Gail to open the line for questions.

[Operator]

Thank you. At this time, I would like to remind everyone that in order to ask a question, press R then the number one on your telephone keypad. We will pause for just a moment to compile the Q&A run. Okay, your first question comes from the line of Nick Otten with CWB Wealth. Please go ahead.

[Nick Otten, Analyst at CWB Health]

Hi, guys. Just wanted to start the questions off on the tariff exposure. For that 15%-20% raw materials exposure, do you think you'll be able to pass off this cost to your customers just in general because it's everyone in the industry affected?

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Yeah, so everyone is affected in the industry. We are focused on the main commodities that drive the biggest value in tariffs. There are three or four key items, key customers that those impact. We are having discussions today, or we have had discussions with our customers about when those increases impact their finished goods on the shelf. We will work to pass on those tariffs with our key customers. Some of the smaller items where it is less than a 10% increase on finished goods, we will see about optimizing kind of production, managing inventory on those. The key items that have the most volume and value, those will have passed on increases to customers.

[Nick Otten, Analyst at CWB Health]

If that 46% comes back, overall, you'll pass it off on for Vietnam, for example.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Correct. Correct.

[Nick Otten, Analyst at CWB Health]

I guess on your cashews business, just trying to do some rough math last night after your release, it kind of looks like it's a break-even business. Is that fair to say? What's the kind of earnings in that area overall?

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Which commodity? Sorry, was that cashews?

[Nick Otten, Analyst at CWB Health]

Yeah, your cashews and mixed nut segment.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

No, it's a profitable segment. I think if the 46% tariffs come across, that's going to be a challenge to, one, get those price increases through, and then the impact to consumer demand will be dramatic. Currently, cashews and mixed nuts are consistent with our overall profit profile.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Yeah. Yeah, I would add, over the last couple of years, since cashew prices came down to almost historic lows, we did see growth in the cashew segment in the snack category. I think with these higher prices that are even separate from the tariffs, just the commodity supply and demand, we've seen increasing cashews. I think you'll see a shift in consumption away from cashews to almonds, peanuts, and some of the other lower-priced retail products, but still profitable item for us.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

As Frank said, with these increases in tariffs, potentially you could see more demand destruction as we do pass those increases on.

[Nick Otten, Analyst at CWB Health]

If you can't pass them on, would you just get out of the cashew business overall?

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

It is still a big piece of the business. I do not know if we would get out of it completely. I will say if these higher tariffs do hit, just like we are having conversations with key retailers today on pepitas that come mainly from China with a 145% increase, those discussions are taking place when those potential increases hit finished goods in July, August. The questions are whether the retailers will still continue those items or hold off and wait until prices come back down and just not have them available on the shelf. We have seen some retailers that are doing just that. That is a straight pepita item that is sold at retail. Some of those retailers are saying, "Let's just not buy the item and wait till the markets come down again.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

Nick, one add-on to cashews. If the 45% or so tariffs from Vietnam do come back, like Jeffrey said, consumer demand will decline, which will result in the underlying cashew price has to decline because of the lower demand. In theory, some of the increase due to the tariff will be offset by a lower commodity cost of the underlying cashew.

[Nick Otten, Analyst at CWB Health]

Would you just be set up to you could capture this back, though, where, like you said, consumers buy more peanuts, pecans, walnuts, something like that as well?

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Absolutely.

[Nick Otten, Analyst at CWB Health]

You could switch to that?

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Yeah, we anticipate.

[Nick Otten, Analyst at CWB Health]

I guess.

[Nick Otten, Analyst at CWB Health]

We'll see.

[Nick Otten, Analyst at CWB Health]

Just for myself, so I have some understanding, just on the inventory transition that you discussed, do you still expect to be in that 60 cents per pound gross margin level range in the next quarter and going forward with the price increases that you put in place?

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

The price increases went in place during the current quarter. I think, Nick, the best way to look at it is if you look at our gross profit section, if you just back out th9e impact of the inventory valuation, which we cited in the release on the Q, and that should be a good indication of what our gross profit per pound should be going forward.

[Nick Otten, Analyst at CWB Health]

Okay. That 90 million spend, is that the addition of two more bar lines to your bar business overall?

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Yeah. Nick, good question. It's a big investment we're making. It's a combination of things. We do believe there's opportunity for growth in the bar category. Some of that $90 million is going towards bar infrastructure. As we talked about in previous calls, we moved our warehouse distribution center to Huntley, Illinois, just down the street to free up space in our Elgin headquarters to expand production. A big chunk of that will go to expanding bar capabilities, but also other parts of our business to expand production capacity.

[Nick Otten, Analyst at CWB Health]

I was just wondering, too, you're comped on incremental capital at 10%. So I was wondering, is that the hurdle rate, or what's the underwriting return that you're expecting on that investment?

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

That's correct. 10% is a correct number to use.

[Nick Otten, Analyst at CWB Health]

All right. I guess on bars, if we exclude that impact from the one producer just being out of the market for a bit, how did bars perform overall? Did they grow? Were they flat without this effect? I was just wondering, getting down to it.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

The exciting news is, as we took on some of the private label share grew within the category because of that recall, we have seen a lot of that stick. Private label has definitely gained market share within the category, which we're excited to see. It is quite substantial, too, that the recall lasted a long time. Consumers, in some cases, had no choice but to buy private label. Once they were in it, they saw the quality, the value proposition. A lot of those consumers have stayed with private label. With this changing economy and the volatility in the market today, we're seeing a lot of consumers not only stay in private label but shift to private label for those lower retail price goods.

[Nick Otten, Analyst at CWB Health]

All right. Thanks, guys. Great quarter. Thanks. I do not have any more questions.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Thanks.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

Thank you, Nick.

[Operator]

Again, if you would like to ask a question, press star and the number one on your telephone key. All right. We see no more hands for questioning. That concludes our Q&A session for today. Oh, I'm sorry for that. We do have another question from Ronald Materko with Private Investor. Please go ahead.

Thank you. Hey, guys. Good quarter and managing through a difficult time. Just one quick one in regards to inventory. I guess A and B. The first one is, are you seeing any light at the end of the tunnel in terms of price or cost increases for many of the nuts out there outside of the tariff issues? Number two is the increase in pounds and price per pound. Is that telling us anything outside of seasonality?

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Sure. I'll cover the first question, Ronald. As far as commodities, we have seen stability in some of the markets. Cashews, for example, actually came down a little bit since they hit historic highs. We've seen some stability there. I believe with the demand destruction that we're going to see with these high retail prices, we should expect some of those commodity prices to come down further. I would say the same for potentially almonds and some of the other nut commodities. These high retail prices, which were passed on in January, there will be additional increases in the June, July time period. Those retail prices will get tough for some consumers. We should expect some of those commodity costs to come down as a result of lower demand.

Right. I guess, and that had been part of the strategy. And just to sneak another one in before part B question gets answered. Am I to understand, are we to understand, I think Nick asked questions about gross margin in the near term. We are looking at 18.5%, which was ex the IVA, to be what you're shooting for?

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

That's on the cost per ballpark, Nick. I mean, Ron, yes.

Okay. Thank you.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

Your second part of your question.

Yep. Thanks.

[Frank Pellegrino, CFO at John B. Sanfilippo & Son]

Yeah. Increased inventory is probably driven by two or three main reasons. One, we have an increase in WIP and finished goods. We will sell through that in Q4. As you saw with our volume, we had some soft volume at the back half of the quarter. That inventory was produced, and we will sell through that inventory in the first couple of months of Q4. The overall increased inventory is mainly driven by a mix. The crops that we procure from the shellers, the walnuts and pecans, we saw an increase in acquisition cost. That crop, we maintain inventory for 9 to 12 months until the next harvest. That is driving the increase in inventory cost and value because the crops that we do not turn in a month are increasing.

Okay. Good. Any thoughts on moving into the, I guess the larger quarters, the seasonally larger quarters are actually not necessarily imminent. Do you have any further updates on strategy going forward outside of what you've mentioned on CapEx?

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Yeah. Strategically, we're actually working on holiday programs right now, just building out promotional programs. Pricing, obviously, I mentioned, will be redone in June, July. Really, the strategy is just to get through some of the volatility in the market, make sure that we have the right price points out there for consumers, the right product mix where if things change and the economy changes dramatically, we've got the right products on the shelf that consumers can still buy. Strategically, the investment in the bar category is important. We're going to continue with that. We believe there's a lot of growth and white space in the bar category, especially for private label. M&A, obviously, always looking at it.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Nothing has come up, but we're always in the, it's always part of our strategic plan to see where we can participate in other categories and apply our competitive advantage and differentiation in manufacturing to other categories.

Okay. That's it. Good. Thanks, Jeff. Thanks, Frank. Good luck.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Thanks, Ron.

[Operator]

One last. Sorry for that. That concludes our Q&A session for today. I will now turn the call over back to Jeffrey Sanfilippo. Please go ahead.

[Jeffrey Sanfilippo, Chairman and CEO at John B. Sanfilippo & Son]

Thanks, Gail. I appreciate everyone's participation on the call today. Thank you for the smart questions. These are volatile times, and we know what to do. We know what needs to be done throughout our organization to continue to provide shareholder value and value for our customers and consumers. I appreciate your interest in JBSS, and have a great day.

Participants

Executives

• Frank Pellegrino, CFO
• Jeffrey Sanfilippo, Chairman and CEO

Analysts

• Nick Otten, Analyst at CWB Health