J&J Snack Foods Q2 2025 Earnings Report

J&J Snack Foods EPS Results

• Actual EPS: $0.35
• Consensus EPS: $0.69
• Beat/Miss: Missed by -$0.34
• One Year Ago EPS: $0.84

J&J Snack Foods Revenue Results

• Actual Revenue: $356.10 million
• Expected Revenue: $369.01 million
• Beat/Miss: Missed by -$12.91 million
• YoY Revenue Growth: -1.00%

J&J Snack Foods Announcement Details

• Quarter: Q2 2025
• Date: 5/6/2025
• Time: Before Market Opens
• Conference Call Date: Tuesday, May 6, 2025
• Conference Call Time: 10:00AM ET

J&J Snack Foods (NASDAQ:JJSF) engages in the manufacturing of nutritional snack foods and distribution of frozen beverages to the food service and retail supermarket industries. It operates through the following segments: Food Service, Retail Supermarkets, and Frozen Beverages. The Food Service segment includes soft pretzels, frozen novelties, churros, handheld products, and baked goods. The Retail Supermarkets segment offers soft pretzel products including Superpretzel, frozen juice treats and desserts, including Luigi's real Italian ice, Minute Maid juice bars and soft frozen lemonade, Whole Fruit frozen fruit bars and sorbet, Philly Swirl cups and sticks, ICEE Squeeze-Up Tubes and dough enrobed handheld products including Patio burritos. The Frozen Beverages segment provides frozen beverages to the food service industry primarily under the names ICEE, SLUSH PUPPIE, and PARROT ICE in the United States, Mexico, and Canada, as well as repair and maintenance services. The company was founded by Gerald B. Shreiber in 1971 and is headquartered in Mount Laurel, NJ.

J&J Snack Foods Q2 2025 Earnings Call Transcript

Key Takeaways

• Q2 net sales declined 1% to $356.1M with gross margin down 320bps to 26.9% due to theater channel weakness, loss of churro LTO, and chocolate cost inflation, resulting in $26.2M adjusted EBITDA and $0.35 adjusted EPS.
• Frozen beverage sales fell by under 1% as volumes dropped 7% from underperforming movie releases and a weaker peso, but early Q3 volumes and industry forecasts point to a 30%+ box office rebound driving a margin recovery.
• Foodservice and retail showed mixed results, with churro volumes off 18.7% after last year’s LTO offset by new customer wins and pretzel share gains, while retail grew 1.8% led by a 14.7% frozen novelties surge from Dogsters and $1M in Dippin’ Dot Sundaes sales.
• Management expects H2 improvement from theatrical rebounds, selective price increases adding 80–100bps in Q3, expanded innovations like a refreshed Super Pretzel recipe, high-protein varieties and “better-for-you” novelties suited for GLP-1 and health trends.
• Financial position remains strong with $48.5M cash, no long-term debt and $213M revolver capacity, enabling $5M of share repurchases and setting the stage for margins to return to the low-30% range in the back half.

Presentation

[Operator]

Good day, and welcome to the J and J Snack Foods Fiscal twenty twenty five Second Quarter Conference Call. As a reminder, this call may be recorded. I would now like to turn the call over to Norberto Aja, Investor Relations. Please go ahead.

[Norberto Aja, Head - IR at J & J Snack Foods]

Thank you, operator, and good morning, everyone. Thank you for joining the J and J Snack Foods Fiscal twenty twenty five Second Quarter Conference Call. Before getting started, let me take a minute to read the Safe Harbor language. This call contains forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made on this call that do not relate to matters of historical facts should be considered forward looking statements, including statements regarding management's plans, strategies, goals, expectations, and objectives, as well as our anticipated financial performance.

[Norberto Aja, Head - IR at J & J Snack Foods]

These statements are neither promises or guarantees and involve known and unknown risks, uncertainties, and other important factors that may cause results, performance, or achievements to be materially different from any future results, performance, or achievements expressed or implied by the forward looking statements. Factors and other items discussed in our annual report on Form 10 ks for the year ended 09/28/2024, and or other filings with the Securities and Exchange Commission could cause actual results to differ materially from those indicated by the forward looking statements made on the call today. Any such forward looking statements represents management's estimates as of the date of the call today, 05/06/2025. While we may elect to update forward looking statements at some point in the future, we disclaim any obligation to do so, even if subsequent events cause expectations to change. In addition, we may also reference certain non GAAP measures on the call today, including adjusted EBITDA, adjusted operating income, or adjusted earnings per share, all of which are reconciled to the nearest GAAP measure on the company's earnings press release, which can be found in our Investor Relations section of our website.

[Norberto Aja, Head - IR at J & J Snack Foods]

Joining me on the call today is Dan Faschner, our Chief Executive Officer along with Sean Munsell, our Chief Financial Officer. Following management's prepared remarks, we will open the call for a question and answer session. With that, I would now like to turn the call over to Mr. Faschner. Please go ahead, Dan.

[Dan Fachner, CEO & President at J & J Snack Foods]

Thank you, Norberto. Good morning, everyone, and thank you for joining us today. While the quarter reflected some short term pressures, our differentiated portfolio and core brands will stand out as we build momentum for the second half of fiscal twenty twenty five. We're energized by the opportunities we see ahead from new customer relationships, innovations and improving operating efficiency. Total net sales for our fiscal second quarter declined 1% to $356,100,000 as compared to the prior year quarter, which was primarily attributed to lower sales in our frozen beverage and foodservice segments, partly offset by growth in our retail business.

[Dan Fachner, CEO & President at J & J Snack Foods]

This led to a three twenty basis points decline in gross margin to 26.9%. Adjusted EBITDA in the quarter was 26,200,000.0 and adjusted EPS was $0.35 per share. Our second quarter performance was primarily impacted by three factors. First, theater channel weakness impacted beverage volumes in our frozen beverage segment and to a lesser extent our foodservice business. The frozen beverage segment was also impacted by foreign exchange headwinds.

[Dan Fachner, CEO & President at J & J Snack Foods]

Second, foodservice sales declined primarily due to the loss of a limited time offer churro volumes from a year ago. And third, we experienced continued input cost inflation, which was mostly related to chocolate in our bakery business. Despite challenges in the quarter, we're confident that the foundation of our business is strong. We expect earnings to improve in the second half, driven by projected theater industry rebound, as well as actions we're taking to capture additional price increases and to grow volume. I'd also like to thank our terrific team members for their effort and dedication to the company and our customers during this challenging quarter.

[Dan Fachner, CEO & President at J & J Snack Foods]

Our teams across the country and globe are leading initiatives that will help drive our long term success. I'm very proud of our teams and their leadership, especially the way that they react to challenges with perseverance and grit. Before I discuss the outlook in more detail, I'll first address the second quarter by walking through our segment performance. Frozen beverage sales declined by less than 1%, with the decline primarily reflecting weakness in the theater channel due to underperforming movie releases, as well as unfavorable foreign exchange impacts from a weaker peso. North America box office sales in our fiscal Q2 declined an estimated 10 as compared to the prior year.

[Dan Fachner, CEO & President at J & J Snack Foods]

Beverage sales declined 7.1% with gallons down by a similar percentage. The beverage sales decline was partly offset by higher maintenance and machine revenue, which rose 4.217% respectively. The beverage volume loss compressed margins, given the relatively higher margin profile associated with beverage sales. Margins were also impacted by unfavorable foreign exchange effects from a weaker peso. While we were disappointed with the theater traffic in the second quarter, we have been pleased with the success of the Minecraft movie to date, which is evident in sharply improved U.

[Dan Fachner, CEO & President at J & J Snack Foods]

S. Beverage volume in early Q3. We are optimistic that a strong summer lineup that includes movie releases such as How to Train Your Dragon and Lilo and Stitch will provide tailwinds to the frozen beverage segment. Industry forecasts suggest that the North American box office sales in our fiscal third quarter could increase by 30% or more as compared to the prior year. Moving on to our food service business, sales declined 1.7% with the largest impact coming from the loss of the limited time offer churro volumes with a major QSR last year, which drove Churo sales down by 18.7%.

[Dan Fachner, CEO & President at J & J Snack Foods]

This year, we successfully added new Churo volumes. And while these additions have not fully offset the strong performance of last year's LTO, we remain encouraged by the compelling opportunity with churros. I want to reiterate that we view LTOs as a valuable platform to engage our customers and create opportunities for long term menu items. Pretzel sales declined by 7.9% with some of the decline driven by the theater channel weakness, as well as general market softness in the pretzel category within foodservice. Notably, our market share improved by 1.4 points and by 4.4 points within Bavarian pretzels as demand for that type pretzel continues to grow.

[Dan Fachner, CEO & President at J & J Snack Foods]

Bavarian pretzels remained a standout performer within the category, making it a key area of focus and a significant opportunity to leverage our leadership position in pretzels. I'm excited about the innovation and marketing behind our pretzel business and we'll share more on that shortly. The segment was also pressured by continued chocolate cost inflation, namely in our bakery business. While we did take incremental pricing in the quarter across our portfolio, it did not fully offset cost inflation. We are continuing to implement price increases across the portfolio selectively during the third quarter.

[Dan Fachner, CEO & President at J & J Snack Foods]

We will continue to be surgical as we implement price increases to protect volume for the long term. Frozen novelties continue to show strength with sales up 4.1%. The growth mostly reflects the continued success of Dippin' Dots, reflecting the rollout to theaters and further penetration with other customers and channels. We expect to drive improvement across foodservice in the second half of fiscal twenty twenty five as we grow volume, increase pricing selectively and bring innovation to the market. Retail sales grew 1.8% in the quarter, including a 14.7% growth in frozen novelties led by the Dogsters brand, which added 2.7 points of share growth in the quarter on continued unit growth.

[Dan Fachner, CEO & President at J & J Snack Foods]

Additionally, the recent launch of Dipping Dot Sundays reached 1,000,000 in sales during the quarter, while ACV climbed to 15%. The outstanding off season performance of this product positions us well for summer as we continue to expand distribution and receive positive feedback from consumers. Regarding handhelds, sales declines reflect temporary capacity constraints caused by a fire related outage at one of our facilities late last year. We are working to mitigate the constraints with supplemental capacity elsewhere. We expect our business interruption insurance to provide some mitigation to these impacts as we work through the details with our insurer.

[Dan Fachner, CEO & President at J & J Snack Foods]

Overall, we are pleased with our retail business performance and continue to invest behind the brands accordingly. I'd like to share more about the recently announced enhancements to our flagship Super Pretzel recipe and packaging for retail. In response to consumer feedback, we made small but meaningful recipe updates to give our Super Pretzel a softer texture and a more robust Bavarian style flavor. The new recipe positions the product well given that Bavarian style pretzels are some of the fastest growing products in the pretzel category. We also refreshed the retail packaging, introduced an omni channel marketing plan to support the launch and will convert some of our top food service SKUs to the new recipe this summer, including the pretzels that consumers find at baseball games and amusement parks.

[Dan Fachner, CEO & President at J & J Snack Foods]

We're very excited about this update to the Super Pretzel brand. And we know that consumers will be pleased with the new enhancements as well. The quarter was challenged in part due to weakness in the theater channel. Additionally, the recent decline in consumer sentiment amidst macro uncertainty may be influencing consumer demand. Although the consumer backdrop presents challenges, we believe our portfolio is relatively insulated during periods of economic uncertainty because our products are relatively affordable and tend to be viewed as treats by consumers.

[Dan Fachner, CEO & President at J & J Snack Foods]

Recent data indicates that consumers rank cost of living and affordability among their top considerations when weighing purchase decisions. We also made progress on several market initiatives during the quarter. We've increased Dippin' Dots theater presence by over 30% since the end of fiscal twenty four. We are thrilled to announce that we recently added Urban Air, the ultimate indoor adventure park and family destination as a new customer for Dip and Dots. Our first shipments will commence soon and we expect Urban Air to become the largest single customer for Dip and Dots.

[Dan Fachner, CEO & President at J & J Snack Foods]

As mentioned, the rollout of Dip and Dots Sundays has been successful and reached $1,000,000 in sales during the quarter, with more growth coming as our distribution expands and we approach the peak selling season. We are testing a churro innovation with a QSR customer as part of their value menu, which could lead to meaningful volume. In fact, this is a great example of a limited time offer fostering a potential permanent menu placement. We continue to bring innovation to the market across the portfolio, including whole grain super pretzel varieties and other new Dippin' Dot products for retail. As it relates to GLP-one drugs, penetration appears to remain steady at around 8% to 9%.

[Dan Fachner, CEO & President at J & J Snack Foods]

It's unclear whether demand for our products has been affected by GLP-one related diet preferences. However, we are actively innovating our portfolio to offer more products that are compatible with GLP-one diets and more broadly better for you diet trends. For instance, we have been developing a high protein pretzel with approximately 10 grams of protein to help meet the growing demand for protein enriched products. We're also innovating some of our frozen novelties to add better for you attributes, such as by enhancing them with electrolytes, antioxidants and probiotics. These are just a few of the innovations that are underway as we adapt our portfolio to meet consumers however and wherever they choose to snack.

[Dan Fachner, CEO & President at J & J Snack Foods]

In summary, while the quarter was more challenging than anticipated, we are optimistic that our results will improve as theater traffic rebounds, price realization improves, our retail brands continue growing in the peak season for frozen novelties and new business initiatives and innovations take hold and help drive results. With that, I would now like to turn the call over to Sean to review the financial results in greater detail. Sean?

[Shawn Munsell, CFO at J & J Snack Foods]

Thank you, Dan, and

[Shawn Munsell, CFO at J & J Snack Foods]

good morning, everyone. Our second quarter revenue declined 1% to 356,100,000.0 Frozen beverage sales decreased less than 1%, foodservice sales decreased 1.7% and retail sales grew 1.8%. Cost of goods sold increased 3.5% to $260,400,000 which generated gross profit of $95,700,000 compared to $108,200,000 in the year ago period, while gross margin declined to 26.9% from 30.1%. The softness in our frozen beverage business primarily caused by lower beverage volumes and foreign exchange headwinds, contributed to approximately 60 basis points of gross margin compression, while the loss of churro and pretzel volumes in foodservice together contributed to approximately 190 basis points of gross margin compression. We continue to monitor the evolution of tariff policy.

[Shawn Munsell, CFO at J & J Snack Foods]

Changes in tariffs did not directly impact our input costs in the fiscal second quarter, but could impact future quarters. The tariffs currently in place could increase our input costs by 4,000,000 to $6,000,000 on an annualized basis, if not mitigated by pricing, alternate sourcing or other strategies. We're actively seeking options to mitigate these impacts. Operating expenses totaled $89,700,000 or 25.2% of sales as compared to 25.1% last year. Operating expenses decreased by less than 1% as compared to the prior year quarter, primarily due to one time start up costs at our regional distribution centers last year.

[Shawn Munsell, CFO at J & J Snack Foods]

Marketing expenses were $28,500,000 or 8% of sales, up from 7.7% last year and increased 3.1% versus the prior year quarter. About half of the year over year increase was related to higher brand amortization expenses associated with the legacy Churro brand that is being phased out for the Ola Churro brand. Distribution costs were $41,800,000 or 11.7% of sales, down from 12.3% in the prior year. Distribution costs overall declined by 5.5%. The decline primarily reflects the impact of startup costs at our regional distribution centers last year.

[Shawn Munsell, CFO at J & J Snack Foods]

Adjusting for those impacts, distribution costs would have been approximately in line with last year as a percentage of sales. Distribution costs rose sequentially from the first quarter as we built inventory in advance of our peak season. Administrative expenses were $19,800,000 or 5.5% of sales, up from 5.1% in the prior year, mostly driven by higher compensation costs as well as higher non recurring legal expenses. Operating income declined to $6,000,000 from $17,900,000 while adjusted operating income was $8,900,000 compared to $21,800,000 last year. The effective tax rate was 27.2% for the quarter.

[Shawn Munsell, CFO at J & J Snack Foods]

Net earnings totaled $4,800,000 compared to $13,300,000 in the prior year quarter, and earnings per diluted share fell to $0.25 versus $0.69 Adjusted earnings per diluted share were $0.35 versus $0.84 in the prior year quarter. Adjusted EBITDA was 26,200,000 versus $39,300,000 in the prior year. We continue to have a healthy balance sheet and liquidity position with $48,500,000 in cash and no long term debt. We had approximately $213,000,000 of borrowing capacity under our revolving credit agreement. We repurchased approximately 39,000 shares for $5,000,000 at an average price of about $128 per share.

[Shawn Munsell, CFO at J & J Snack Foods]

In closing, we are encouraged that we will deliver a stronger second half driven by improving theater attendance, the impact of pricing actions and exciting innovation across our portfolio. With a portfolio of great products and brands, J and J is well positioned to deliver value to both customers and shareholders in the quarters ahead. I would now like to turn the call over to the operator for Q and A. Operator?

[Operator]

Thank you. At this time, we will conduct a question and answer session. Our first question comes from the line of David Sheknaw of William Blair. Your line is now open.

[David Shakno, Analyst at William Blair & Company, L.L.C]

Hey, good morning. You provided a helpful gross margin bridge in the press release, but I think there were 70 to 80 bps not covered within that. Any color that could help us understand the balance of the decline there?

[Shawn Munsell, CFO at J & J Snack Foods]

Yeah, sure. Good morning. Most of the remaining balance really just represents that chocolate cost inflation relative to the pricing offset. So that was about 60 basis points and that covers most of the gap.

[David Shakno, Analyst at William Blair & Company, L.L.C]

Got it. And then just one follow-up here. Forgive me if I missed this in the prepared remarks, but you mentioned last quarter that you didn't expect to get gross margins back to the low 30s until the second half of the year. Wanted to see if that's still the expectation or if you've had to recalibrate that a bit given the macro environment.

[Dan Fachner, CEO & President at J & J Snack Foods]

No, we still believe that's the expectation for us as we enter into the back half of the year.

[David Shakno, Analyst at William Blair & Company, L.L.C]

Got it. Great. Sounds good. I'll pass it on.

[Dan Fachner, CEO & President at J & J Snack Foods]

Thank you.

[David Shakno, Analyst at William Blair & Company, L.L.C]

Thank you.

[Operator]

Our next question comes from the line of Todd Brooks of The Benchmark Company. Your line is now open.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

Hey, thanks for taking my questions. Dan, just following up on the expectation to get gross margin back to the low 30s. Does that assume just the pricing that you've been able to capture to date? Or does that assume some success with forward pricing activities?

[Dan Fachner, CEO & President at J & J Snack Foods]

Well, it does assume some of the pricing that we have as it continues to build through the remainder of this year. And then also don't forget as we get into the back half of the year, you have the influence from our frozen beverage business and our Dippin' Dots business. And even as we said in the remarks, early indications if the theater business comes back and as we look at early Q3 right now, those two pieces of business really start to drive that margin nicely as we get into the back half.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

And where we're highlighting theater as such a driver, can you update us on I think last we heard it was kind of 25% of frozen beverage and a slightly lower percentage in foodservice. Where are the percentages now as we start to look at the ebb and flows on theater attendance?

[Dan Fachner, CEO & President at J & J Snack Foods]

Yeah, we're still in that same area, Todd. That hasn't changed a lot. It has a precise impact on our frozen beverage business. Will begin to have a larger impact on our Dippin Dots business as well. And then, of course, as this last quarter unfolded, we saw a dip on the food service pretzel side of our business.

[Dan Fachner, CEO & President at J & J Snack Foods]

So all three of those have a piece of it, but specifically to the IC side, it's about 25% of their business.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

Okay, great. A couple more quick ones. Sorry, Sean, go ahead.

[Shawn Munsell, CFO at J & J Snack Foods]

Yeah, I was just going to say as it relates to getting back to 30% in the second half and Dan touched on it, remember as we get into the second half, you get a much higher proportion of our business coming from frozen beverage, retail and retail is, it's mostly frozen novelties as well as the Dippin' Dots business. So in all of those are our higher margin businesses. And just using twenty four as a point of reference, our frozen beverage business grew sequentially from Q2 to Q3 by about 40%. Europe about 30% retail and a much bigger increase in the Dip and Dots business.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

Okay, great. And then two more quick ones, I may. Sean, on the distribution line, with the volume, we should leverage that, I would expect, in the second half of the year. But that ability to get down to that 10% or slightly below level, Is that tracking based on kind of what you're seeing and how the facilities are operating?

[Shawn Munsell, CFO at J & J Snack Foods]

It is. So I would expect that we'd see something closer to 10%, near 10% in the third quarter, not terribly different from where we were last year.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

Okay, perfect. And a final one, just if we're thinking about Q2 versus Q3, how does Easter impact the business? Is there any Easter shift impact with not just the holiday shift, but later spring breaks and things like that, that either you can size from what it cost the March quarter just talk to as a driver for the upcoming quarter? Thanks.

[Dan Fachner, CEO & President at J & J Snack Foods]

Yeah, Todd, probably more impacted by weather during this time of year than we are by Easter break itself. Although there's plenty of occasions that get taken around Easter and so it starts to kick in for many of our amusement parks, probably as you think about May, but more impacted even by Memorial weekend than it is by Easter. We just get into that time of year now where you really want to cheer on the weather as we get into the more summer months and kids are out of school.

[Todd Brooks, Equity Research Analyst at The Benchmark Company LLC]

Okay. Fair enough. Thank you both.

[Operator]

Thank you. Our next question comes from the line of Andrew Wolf of CL King. Your line is now open.

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

Hi, good morning.

[Dan Fachner, CEO & President at J & J Snack Foods]

Good morning, Andrew.

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

So I wanted to hear about a little more about your kind of top line views. You know, clearly, theater business is gonna be a nice tailwind at least in the, you know, this quarter, for food servicing. But, you know, you and and frozen beverages that is you know, like, as Todd got to, you know, that's, you know, it's a big part of the business, but the majority of the business is, you know, rest of food service, amusement parks, and so on, and convenience stores. So are are you expecting that to be good enough from that 25% or so of the business, that 30% increase in traffic to theaters to have the top line turn up in those two segments? Or another way of saying it is what's going on with the end customers?

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

Right. Sort of organically, how do you view the season, the summer season for your food service customers and I guess convenience stores if you have a view on that as well.

[Dan Fachner, CEO & President at J & J Snack Foods]

Right. Well, as we've talked about, it's a tough quarter for sure. With consumer confidence and sentiment struggling, right? We know there's an impact from that on our business. But what we really tried to highlight is that we view it as three real buckets that are headwinds in the quarter that start to go away as we look into the third and fourth quarter.

[Dan Fachner, CEO & President at J & J Snack Foods]

That theater business as we've talked about and there's also conversation about is that theater industry dying? But every time we see a good movie like we did with Minecraft, we see that business just jump up and do really, really good things for us. And so if you look at the beer business as you get into the third quarter, especially the one that we're in right now, it looks to be really, really strong and then levels off a little bit in June and then looks to be a nice fourth quarter for us as well. We don't have that churro piece of business that we're at that headwind that we're up against. That was a great LTO and it spurred some other LTOs and may even spur a permanent menu item on a big QSR chain that we're really excited about that will happen in '26.

[Dan Fachner, CEO & President at J & J Snack Foods]

And as we mitigate the input costs, especially around chocolate as we get into the back half of the year, We think all of those headwinds are kind of behind us. And then you're looking squarely at what does consumer confidence look like. That's a tough one to try to understand. We believe and we have great confidence in what we're doing and the new pieces of business that we're bringing on and the new innovation, even as we talk about the pretzel innovation with new packaging and a new recipe, we're really encouraged by that. We think, I guess I would say we're optimistic about the back half of this year and it's going to be really strong.

[Dan Fachner, CEO & President at J & J Snack Foods]

It might end up slightly below last year's sales, but we still are hopeful that back half of the year can do really good things for us.

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

All right. And I wanted to ask about kind of price realization as part of you know, it's getting better, but I think you did say you want to be selective with price increases. And I can understand, you know, this is not the time to be, you know, just throwing out, you know, on unaudited. You know, I'm sure you're gonna get audited on a lot of this stuff by your regular customers. But where do you feel I mean, do you feel you're gonna get your price realization and, you know, the impacted categories of chocolates and eggs and, you know, anything else that really has real inflation in it?

[Dan Fachner, CEO & President at J & J Snack Foods]

We do. We think we're catching up to that really nicely. The teams teams have done a nice job getting out there and getting the pricing. It may have come a little slower than we anticipated, but it also came with some directions from me that I don't want to lose volume or customer as well, while we're passing this needed price increase along. And that's going to continue to build even as we get into the third quarter.

[Dan Fachner, CEO & President at J & J Snack Foods]

We feel confident that the team has gone out there and got that. We've been careful not to turn the wheel too quickly as to lose some volume along the way. It's a delicate balance, but we're feeling good about where we're going to be there. Sean, do you want to add a couple percentage points to that or?

[Shawn Munsell, CFO at J & J Snack Foods]

Yeah, yeah, I'd say that, just to help quantify, we expect it will pick up, call it another 80 basis points, maybe a full percentage point here in the third quarter. But like Dan said, we're being surgical about it and ensuring that we're not losing volume. And that's part of what slowed the pace in the first quarter I'm sorry, the second quarter.

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

Yeah, no, that's understandable. Thanks for the quantification.

[Shawn Munsell, CFO at J & J Snack Foods]

Yeah.

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

I guess my last one is on the Dipping Dot Sundae's. That's the only retail product, if I understand that?

[Dan Fachner, CEO & President at J & J Snack Foods]

Is the only retail product to date. We're working on another one that some of the teams are out there already talking to customers about that we're really excited about. So as we round out into 2026, we believe we'll have a couple of those Dippin' Dot items out in the field. But we're so happy with the success of the Sunday so far, and it's early, right? Even as we see April, April sales really jumped out at us.

[Dan Fachner, CEO & President at J & J Snack Foods]

So we're excited about that in over 8,000 locations and consumer sentiment has been really strong about that product. And if we can back it up with this next new innovation that we have, I think we'll continue to see great things from it.

[Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates]

Got it. Well, that's it for me. Thank you.

[Shawn Munsell, CFO at J & J Snack Foods]

Thank you.

[Dan Fachner, CEO & President at J & J Snack Foods]

Thanks.

[Operator]

Thank you. Our next question comes from the line of Scott Marks of Jefferies. Your line is now open.

[Scott Marks, Equity Research Analyst at Jefferies]

Hey, good morning, guys. Thanks so much for taking our questions.

[Dan Fachner, CEO & President at J & J Snack Foods]

Morning, Good morning, Scott.

[Scott Marks, Equity Research Analyst at Jefferies]

Good morning. First thing I wanted to ask about just the pretzel category. So you mentioned pressure on the pretzel category from the theater traffic, but you also mentioned just other general category weakness. So was just wondering if you can kind of speak to that and give us some insight into where exactly that's stemming from and what the drivers are.

[Dan Fachner, CEO & President at J & J Snack Foods]

Yeah, the category did show some weakness in the quarter. And it's something that we're trying to address even as we talked about some new packaging and formulation of our product that will begin in the retail side to be a little bit more like a Bavarian style pretzel, which we see some real growth in the category. What's interesting is our market share grew, but the category is down. And so when you look inside the pretzel business, you see that the Bavarian style pretzel growing. And so we're going to attack that really strong.

[Dan Fachner, CEO & President at J & J Snack Foods]

Teams have done a really nice job. We did some great market research across the country to ensure that consumers like the new product and like the new packaging. And so you're seeing that out in the stores right now. Feel like that will bring some emphasis back to it. We're still bullish on the pretzel category, but whenever you see a category down, even if you're growing inside it, it draws attention.

[Dan Fachner, CEO & President at J & J Snack Foods]

I think there's also a chance that also within that, that's where we're seeing some of that consumer confidence that might be an area that some of the places just aren't as busy and we're not getting the pull through on the pretzel category.

[Shawn Munsell, CFO at J & J Snack Foods]

And we did, we talked to one of our QSR customers where we did see some year over year weakness in 2Q and it was interesting. They did cite some of the traffic within their stores. But part of that, they did attribute to the weather that we had in the quarter. So certainly not pinning it all on weather, but it seems like at least for some of our customers that was having an effect.

[Scott Marks, Equity Research Analyst at Jefferies]

Got it. And then I know there's been a lot of discussion about the theater channel, but I don't think I heard as much about the convenience channel. So was just wondering if you can kind of speak to trends throughout the quarter and maybe what you've seen as we've kind of progressed into April and here into May.

[Dan Fachner, CEO & President at J & J Snack Foods]

The convenience channel has been off for about eighteen months or so now, maybe even longer than that. And it continues to be down even as you talk to that industry, it's down. We're doing some good things within the channel. We're continuing to grow some of those equipment sales that you saw out of frozen beverage side is going into the convenience channel. So, we're still pushing hard at it and seeing some growth, but the total channel has been off for us.

[Dan Fachner, CEO & President at J & J Snack Foods]

I think in the quarter, was down something like 7%.

[Shawn Munsell, CFO at J & J Snack Foods]

Yeah. And from a gallons perspective in the frozen beverage business.

[Scott Marks, Equity Research Analyst at Jefferies]

Got it. And then last one for me. As we think about maybe some of the regulatory changes around artificial ingredients from some of the health departments here in The US, just wondering if you can kind of help us understand maybe your exposure to that and maybe how you're working on reformulations to try to get around some of those changes.

[Dan Fachner, CEO & President at J & J Snack Foods]

Yeah, really proud of the teams. They've been right on top of this and doing a really good job. The first really one that we're focused on is the dye number three, red dye number three, and that is now out of all of our products. And so we're watching it closely. We're continuing to read up on it.

[Dan Fachner, CEO & President at J & J Snack Foods]

We've got a team focused on what we need to do to make sure we stay within regulation. And we feel like we'll be way ahead of that as laws get passed in different states and things like that.

[Scott Marks, Equity Research Analyst at Jefferies]

Got it. Thanks so much. I'll pass it on.

[Dan Fachner, CEO & President at J & J Snack Foods]

Thank you, Scott.

[Operator]

Thank you. I am showing no further questions at this time. I would now like to turn it back to Dan for closing remarks.

[Dan Fachner, CEO & President at J & J Snack Foods]

Thank you very much. In closing, we are encouraged that we deliver a stronger second half driven by improving theater attendance, the impact of our pricing actions and exciting innovation across our portfolio. With a portfolio of great products and brands, J and J is well positioned to deliver value to both customers and shareholders in the quarter, and we feel strong about that. We look forward to sharing our third quarter results. And in the meantime, invite you to contact our Investor Relations team at JCIR at (212) 835-8500 with any questions.

[Dan Fachner, CEO & President at J & J Snack Foods]

Thank you, and have a great day.

[Operator]

Thank you for your participation in today's conference. This does conclude the program. You may now disconnect.

Participants

Executives

• Dan Fachner, CEO & President

Analysts

• Norberto Aja, Head - IR at J & J Snack Foods
• Shawn Munsell, CFO at J & J Snack Foods
• David Shakno, Analyst at William Blair & Company, L.L.C
• Todd Brooks, Equity Research Analyst at The Benchmark Company LLC
• Andrew Wolf, SVP & Senior Research Analyst at C.L. King & Associates
• Scott Marks, Equity Research Analyst at Jefferies