J & J Snack Foods Q2 Earnings Call Highlights

Key Points

• Margins improved despite softer sales: Sales fell 3.2% to $344.8M, but adjusted EBITDA rose 9.5% to $28.7M and adjusted EPS increased 14.3% to $0.40, with consolidated gross margin up 190 bps; reported EPS was only $0.09 due to one‑time restructuring charges.
• Project Apollo driving cost savings but fuel is a risk: Management says plant consolidations are materially complete and the company remains on track for at least $20M of annualized Apollo savings, with additional G&A and distribution cuts expected, while higher fuel could create roughly a $3.5M H2 headwind if unmitigated.
• Active capital returns and product momentum: J&J repurchased $22M of stock this quarter (about $72M over 12 months) and paid $15.2M in dividends, while new-product shipments and strength in pretzels, Dogsters growth (and a Snoopy licensing deal) plus expanding ICEE tests support growth prospects.

J & J Snack Foods NASDAQ: JJSF reported fiscal second-quarter 2026 results that showed margin expansion and higher adjusted earnings despite a decline in sales, as management pointed to benefits from its “Project Apollo” transformation and ongoing portfolio reshaping.

Chief Executive Officer Dan Fachner said the company delivered “positive earnings and margin expansion despite a quarter that was impacted by demand softness amid rising fuel costs.” Adjusted EBITDA rose 9.5% year-over-year to $28.7 million and adjusted earnings per share increased 14.3% to $0.40. Sales declined 3.2% to $344.8 million.

Sales trends: foodservice and retail decline, frozen beverages improve

Fachner said foodservice sales fell 5%, with “most of the decline attributed to the anticipated sales reductions in our bakery business consistent with Q1.” Retail sales declined 4.1%, which he attributed to “higher slotting fees and trade investments to support our innovation pipeline and brand share growth objectives.”

Chief Financial Officer Shawn Munsell provided additional segment detail on the call:

• Foodservice: Net sales declined $11.4 million, or 5%, to $214.7 million. Munsell said about $8 million of the decline was due to planned reductions in a lower-margin bakery business. He also cited about a $4 million decline in cookie sales to a large customer “working through elevated inventory levels,” adding that the company expects orders to rebound in the third quarter. Churros sales fell about $3 million and handheld sales declined $3.4 million, partially offset by pretzel strength, with pretzel sales up $6.7 million.
• Retail: Net sales decreased $2.2 million, or 4.1%, to $51.6 million. Frozen novelty sales declined about $3.9 million, partly offset by higher handheld sales. Munsell said retail results were impacted by roughly $2 million in higher slotting fees tied to new product innovation and increased trade investment, primarily in frozen novelties.
• Frozen beverages: Net sales increased $2.3 million, or 3.1%. Munsell said beverage sales grew 13% due to higher theater sales and favorable foreign exchange, while service sales declined $3.2 million because a customer chose to insource maintenance. He said the company does not expect a meaningful margin impact as it temporarily downsizes its tech network while pursuing replacement business.

Profitability: gross margin up 190 basis points; one-time charges weigh on reported EPS

Consolidated gross margin improved 190 basis points to 28.8%, which Munsell said primarily reflected Apollo initiatives and favorable mix in foodservice and frozen beverages. Foodservice operating income increased $3.4 million to $10.9 million on gross margin improvements tied to plant consolidation and mix, while retail operating income declined $3.9 million due to slotting fees, trade, and mix shift.

Operating expenses increased $7.8 million to $97.5 million, including $6.5 million in non-recurring items related to plant closures and other restructuring costs, of which $4.1 million was non-cash. Administrative expenses rose to $21.2 million, up $1.4 million year-over-year, which Munsell said was mainly due to $1.7 million in non-recurring charges tied to legal expenses and other restructuring items, including severance.

Adjusted operating income was $9.6 million, up from $8.9 million a year earlier. The effective tax rate was 28.1%. On a reported basis, earnings per diluted share were $0.09, compared to $0.25 last year, with Munsell attributing the difference primarily to one-time charges.

Project Apollo savings and cost pressures: fuel in focus

Management highlighted continued progress on Project Apollo. Fachner said plant consolidations have created “significant plant efficiencies,” and he reiterated the company is on track to deliver at least $20 million of annualized Apollo savings once all initiatives are implemented. He said the company has shifted focus toward administrative and distribution cost reductions, noting administrative initiatives were executed later in the second quarter and are expected to be completed in the third quarter, while distribution efficiencies are expected to ramp in the third quarter.

In response to questions, Munsell said the plant consolidation work is “materially complete” and that plant savings in the quarter were “above $4 million,” which he described as above the implied run rate. He said the remaining savings are expected to come from G&A and distribution initiatives. Munsell said the company expects to reach at least $2 million in annualized G&A savings and about $3 million of distribution cost savings as initiatives ramp through the third and fourth quarters, with a full run rate expected by the end of the fourth quarter.

Rising fuel prices were a recurring theme. Munsell said distribution costs included a $400,000 headwind from higher fuel costs, and added that if fuel remains at current rates, fuel costs could increase by about $3.5 million in the second half versus the prior year if not mitigated. He also noted potential packaging risk later in the third and fourth quarters, though he said “the lion’s share” of the impact would be direct fuel costs.

Fachner said higher fuel costs can quickly affect demand, particularly in convenience stores, explaining that consumers “are at the gas pump” and may decide not to make additional purchases. He also said foodservice demand can be affected. On pricing, he said parts of the business, including ICEE and Dippin’ Dots, have “disciplines…that allows us to be able to almost take those immediately,” while foodservice and retail are “a little bit more difficult,” adding the company is monitoring conditions and will take pricing action “if need be.”

Innovation pipeline, brand initiatives, and capital allocation

Fachner said the company remains “early in the process” on innovation, but described progress in the sell-in process and expanding distribution. He said the company shipped more than $2 million in new products during the quarter, including about $900,000 of Dippin’ Dots for retail, $900,000 of new Dogsters ice cream products, and $200,000 of Luigi’s Mini Pops. He said pretzel innovation shipments are ramping up.

Fachner also highlighted strength in foodservice pretzels, saying sales rose $6.7 million and dollar share increased 4.3%, driven primarily by Bavarian-style pretzels. In retail, he said Dogsters volumes shipped were up more than 20% versus the prior year, and announced a new licensing partnership with the Peanuts character Snoopy tied to the Dogsters brand, along with plans to introduce Dogsters products to pet stores.

In frozen beverages, Fachner said themed brand activations tied to movie releases supported performance, and he pointed to a second-half slate that includes “Super Mario Galaxy, Star Wars: Mandalorian, and Toy Story 5” as supportive of theater performance. He also said an ongoing ICEE test with a West Coast quick-service restaurant has expanded to additional markets and is nearing the end of the test phase, with a potential decision “before we even exit summer.” Fachner said a Taco Bell limited-time offer did not deliver as much volume as originally anticipated, though some volume is expected to carry into the next quarter, and he called the customer relationship “strong.”

On capital returns, Fachner said the company repurchased $22 million of shares during the quarter at an average price of $84.56 and paid $15.2 million in dividends, returning more than $37 million to shareholders in the quarter. Munsell said the company repurchased about 785,000 shares for $72 million over the past 12 months and returned $95 million to shareholders through buybacks and dividends in the first half of 2026. He added that management continues to see “compelling value” in the shares, while noting an increase in potential M&A activity that could factor into future capital allocation decisions.

The company ended the quarter with approximately $31 million of cash net of debt and about $181 million of borrowing capacity under its revolving credit agreement, according to Munsell. The company generated about $16 million in operating cash flow and invested $16 million in capital expenditures during the quarter.

In closing remarks, Fachner said second-quarter results show the transformation “is taking hold,” and that the company can “drive earnings growth despite some top-line softness,” while remaining confident in delivering the full benefits of Project Apollo.

About J & J Snack Foods NASDAQ: JJSF

J & J Snack Foods NASDAQ: JJSF is a U.S.-based manufacturer and distributor of branded snack foods and frozen beverages. Headquartered in Pennsauken, New Jersey, the company develops, produces and markets a broad array of proprietary and licensed products for retail, concession and foodservice customers. Its offerings span soft pretzels, frozen novelties, real Italian ice, churros and packaged beverages under well-known names such as ICEE, SuperPretzel, Luigi's and ChurroMan.

Founded in 1971 by Gerald B.

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