J. M. Smucker Aktie

Good morning, and welcome to the J.M. Smucker Company's Fiscal 2026 Fourth Quarter Earnings Question-and-Answer Session. This conference call is being recorded. [Operator Instructions]

I'll now turn the conference call over to Crystal Beiting, Vice President, Investor Relations and Financial Planning and Analysis. Thank you. You may begin.

Good morning, and thank you for joining our fiscal 2026 fourth quarter earnings question-and-answer session. I hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website at jmsmucker.com. We will also post an audio replay of this call at the conclusion of this morning's Q&A session.

During today's call, we may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, we use non-GAAP results to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning's press release.

Participating on this call are Mark Smucker, Chief Executive Officer, President and Chair of the Board; and Tucker Marshall, Chief Financial Officer, Executive Vice President, Frozen Handheld and Spreads and Sweet Baked Snacks.

We will now open the call for questions. Operator, please queue up the first question.

[Operator Instructions] Our first question today is coming from Andrew Lazar from Barclays.

Maybe to start, I know one of the biggest points of uncertainty for the group currently is really the macro outlook and what that might mean for costs. Understanding the challenge of needing to guide to a full year in the context of this environment, I guess I'm curious what sort of visibility you have to your low single-digit inflation outlook, excluding coffee in terms of hedges and such? And is there a risk that this estimate could ultimately be higher as we move through the year if sort of the macro environment persists and sort of the offsets that you might have in terms of productivity generation to manage through that?

Andrew, thank you. As you've noted, within our full year outlook, we do expect mid-single-digit percentage deflation. And again, that's largely driven by green coffee. But as you've shared, excluding green coffee and tariffs, we do anticipate cost inflation of low single digits across the balance of our portfolio. And that's largely coming through packaging, ingredients and transportation. And we have embedded our best outlook for those increases in our current guidance.

And as you know, in any given fiscal year, we'll monitor and address any additional cost inflation either through how we procure the given item or how we think about our hedging strategy, along with ongoing cost and productivity savings, inclusive of taking pricing when and where appropriate. And so right now, this really reflects the best estimate. And again, we look to absorb these changes within our total guidance range. And just acknowledging that the primary driver of this is the geopolitical tensions in the Middle East. And depending upon the duration of those does have an implication to the cost outlook and how we manage over time.

And then in coffee, given the expected mid-single-digit price decline or price realization year-over-year for the coming year. I guess, why wouldn't we expect a somewhat greater volume outcome or volume improvement with pricing moving lower?

Thanks, Andrew. I'll take the second question. This is Mark, of course. I can't help but at least comment, first of all, that we had a great quarter and a solid outlook for our new fiscal year. And so just feeling positive about the momentum in our business and overall, the portfolio that we have being both complementary and cohesive just because we play in different categories, but they all work together to achieve a great hole.

And then specific to your question just on coffee, it is a great category. We continue to lead the category across segments and the value spectrum with Bustelo being a very significant growth brand now beyond $0.5 billion in sales. So just confident in our ability to continue to manage our branded position in coffee as well as our or commodity. And as we noted, we do expect to see profit improvement in coffee from the moderating commodity. And as it relates to how we're thinking about forecasting the business, we really just wanted to be, frankly, prudent in terms of how we're factoring in elasticities we acknowledge we did have some favorable -- more favorable than expected elasticities in the inflationary period, but just acknowledging that the consumer continues to be cautious we wanted to be prudent in how we model the deflation.

And as we are starting to give back some pricing to the consumer in the form of trade just making sure that we're thinking about those elasticities and the trends in the category from a prudent perspective. So that's really the driver there.

Your next question today is coming from Peter Galbo from Bank of America.

Mark, I was hoping to press a little bit on that last point you made around prudence as it relates to the top line guide for the year, obviously talking about flat sales in the first quarter and then a deceleration, I suppose, to get to the full year down 3% to 4%. So understanding that maybe there's some prudence baked into the coffee side of the equation. Maybe you can just touch a little bit more on prudence in the other segments, particularly, I think frozen handheld may be down despite Uncrustables growth potential. Just if you could provide a little more detail there, please.

Sure. So if you think about our frozen handheld and spreads business, I think it's important to think about that business holistically, right? Because we are seeing a little bit of pressure in spreads, but our Uncrustables brand continues to perform very well. And so it is -- if you think about that holistically, it's a peanut butter and jelly story, it's a sandwich story, right?

And Uncrustables, we hit $1 billion. So we have a tremendous performance in Uncrustables and we do expect to continue to see growth in the Uncrustables brand, and that's going to continue to be driven by the breadth of our position in the frozen category, both -- and that includes our offerings, the fact that we're addressing consumer needs, both through flavors, through format and also different occasions, notably with the higher protein sort of morning offering, if you will, and now fridge friendly.

So our position in Uncrustables continues to give us great confidence that we will continue to see growth it won't be double-digit growth, but nonetheless, as the leader in the category with the strongest share of voice, we do continue to believe that there is runway both through distribution household penetration, innovation and then ultimately, strategic investments in supporting the brand through our brand-building efforts. So again, great confidence in Uncrustables overall. And then just the total spreads handheld category being more about that PB&J total story.

Okay. And just as a follow-up, Tucker, there's obviously been some trade press around potential further actions on a portfolio review basis as it relates to the Hostess business. Just curious, as you all are evaluating potential options, just how you're thinking about portfolio construction and potential for further actions across the portfolio.

Yes, Peter, it's Mark. I'll take that as well. As we think about our portfolio in general, we've been on this journey for quite some time in terms of our portfolio. We always consider the makeup portfolio and so that's something that is important to us. But what I would focus on right now is as it relates to Sweet Baked Snacks and Hostess, our focus continues to be stabilizing that business. and improving profitability.

Notably, we have strengthened the portfolio in terms of SKU rationalization. Obviously, Donettes grew 13% and represents about 40% of the portfolio. So that breakfast occasion for Hostess continues to perform very well. I would also highlight that we did complete our manufacturing footprint consolidation. And although we did have a fire in the prior quarter, we did recover from that more quickly than expected. So definitely some positive indicators, some innovation, notably Suzy Q's, among some of our other seasonal and LTO things, we're going to continue to focus on stabilizing the portfolio. It's going to take some time, and it's going to take a bit of time until we actually see top line growth but suffice it to say stabilizing the business and improving profitability is where we're focused right now.

Next question is coming from Tom Palmer from JPMorgan.

In the prepared remarks, you gave some specific margin expectations for coffee and Sweet Baked Snacks. I wonder if you might give some added detail for frozen handheld spreads and Pet segments. So for Pet, do you expect low single-digit top line growth to translate to profit growth? And then for frozen handheld to what extent might the margin strength of the fourth quarter be sustained into 2027?

Yes. Tom, as you think about the construct of our $0.85 EPS growth year-over-year. What you're really seeing is $0.75 coming through our business portfolio, which is driven by segment profit growth from both coffee and Hostess being offset by frozen handheld and pet. And really, when you think through that is coffee growth year-over-year is largely coming through lapping unmitigated tariffs and in the green coffee deflation that is beginning to materialize through the portfolio.

Hostess' growth year-over-year is largely driven by improved cost outlook, inclusive of a list price increase to cover cost inflation. And then frozen handheld and spreads will be down year-over-year as volume momentum in Uncrustables is offsetting the spreads portfolio, but also as we continue to make strategic investments across Uncrustables and we support marketing of that brand as well. And then within the Pet portfolio, we see continued volume momentum across both the Meow Mix and Milk-Bone, but we are also making investments in terms of marketing and the inflation that we're experiencing is largely impacting our pet portfolio. And then lastly, as you just think about the momentum of the portfolio, we do expect the Away From Home business to roughly be flat year-over-year from a profit standpoint.

Great. I did have a follow-up on marketing. I think relative to what was laid out in the third quarter, marketing was a lot lower in the fourth quarter. Just any color on the decision to pull back in the fourth quarter and kind of how quickly it ramps up to start out the year?

Yes. So we are committed to supporting the growth of our brands and to develop our brands through ongoing marketing. And we've called out that we're about 5.7% of net sales for the upcoming fiscal year. It's going to look like up $30 million year-over-year, almost $0.5 billion spend. And it will be fairly balanced throughout the year, but it will begin in our first quarter in terms of those investments to support the portfolio. And I would just say there was nothing abnormal in our fourth quarter. It's probably more just around timing and focusing around various activities. But again, we are committed to the portfolio and the spend of those marketing dollars as we move forward.

[Operator Instructions] Our next question is coming from Robert Moskow from TD Cowen.

Tucker and Mark, there's some comments about what the transformation office is up to, they're rather brief. And a lot of your peers are doing some accelerated work to reduce overhead costs and you might have some opportunities that you want to get to. Is there anything that you're looking at to accelerate the efforts of the transformation office, if not in fiscal '27, maybe even a year from now?

Yes, Rob, we remain committed to ongoing in annual cost and productivity initiatives. And I would say that each fiscal year, we target a gross cost savings amount that is a couple of points of revenue to support either reinvestment in the business to cover inflation or to ultimately return to shareholders.

As we think about the ongoing positive momentum of our transformation efforts under Rob Ferguson's leadership, he's really thinking about the next generation, which is refilling a multiyear pipeline and really began to focus on really 2 areas, I would say, our make -- our key word to refer to it is our buy, make and move environments within our supply chain. And also how we think about bringing technology forward to advance our cost picture as a company. And so over time, we will be able to share more with you and others as we think about sort of the next phase of our transformation efforts.

Your next question today is coming from Chris Carey from Wells Fargo Securities.

I wanted to start with coffee and just get a bit more context on the pricing actions. So first is just from a timing perspective, at what point are you transitioning from trade spending into with price reductions. And then is that pricing strategy happening across the portfolio? Or is it primarily focused on the roast and ground piece given the proximity to the actual green coffee commodity?

Chris, thanks. It's Mark. No, we -- coffee is a pass-through category, right? So we do pass through up and down costs to our customers and our consumers. We always are -- we do it prudently. We do it in a justified manner. When we speak with our retail customers, we certainly are going to have conversations that are fair and justified as we take those. As I did mention, and you point out currently focus a bit more on trade. We can't commit to specific timing, but what I will tell you is when we do cross key thresholds that are essentially dictated by us, the timing of when we take physical inventory of lower-cost coffee, that would dictate when we would actually take a list price decline.

But we want to make sure that we, of course, continue to take a measured approach that also supports our financial goals for the year and our ability to both be fair with our customers and consumers and of course, deliver some degree of profit recovery, which you've seen in our guidance.

Chris, I would also acknowledge from a flow standpoint, if we've called out a down 3% to down 4% of top line net sales, in our prepared remarks, we talked about our first quarter being flattish. We'll really begin to experience the deflation associated with green coffee and our second quarter onward. Just to give you a sense of kind of the flow through the year from a top line standpoint.

Okay. Understood. The second question is on Sweet Baked Snacks. The outlook for the year I think, implies something in the 30% growth range from a profit perspective, given the margin improvement you're expecting thereabouts anyways. The visibility of this business has been a bit challenged in recent quarters. Can you just give us a sense on your ability to forecast accurately this business? How do you feel about that? How did fiscal Q4 come in relative to your own expectations? And maybe a bit more context on the confidence that you have in a strong profit acceleration for the business in fiscal '27.

Yes, I'll start and maybe pass it to Tucker if he has anything to add. We've gotten our arms around this business in terms of visibility, as you point out. Last year, we did have some challenges with trade and the timing of that. I think we've done a very nice job and I have to give the team and judge a lot of credit just in terms of how we're managing through this, both in terms of the production network, the consistency of how we're producing the products as well as how we are consistently managing our customer and trade relationships.

And Chris, I would acknowledge that your direction of up about 30% year-over-year from a segment profit standpoint, is correct. We believe that we continue to work to control costs within our bakery environment. We continue to focus on executing the best level of trade against the brand or the portfolio. We are taking a list price increase across the Donettes portfolio in certain select areas. And as we think about the objectives for this year, it stabilized the business and achieve our profit targets and then over time, work to growth across the portfolio. But we also acknowledge that we will continue to deal with both headwinds and tailwinds. But we're confident, as Mark said, with the visibility that we have and the fact that the teams have their arm around -- their arms around, excuse me, what needs to be accomplished.

Our next question today is coming from Max Gumport from BNP Paribas.

First, I just wanted to talk about the Spreads business. You called out this partly due to broader category dynamics and partly due to the decision not to repeat certain promotional activities. So I was hoping we can get a bit more color on both the -- so one, what you're seeing in the category. And then two, on this decision not to repeat promo activity. We've heard others in the industry talk about consumers waiting to buy in promotion and that leading to poor returns. Are you seeing this dynamic as well?

Max, our Spreads business, obviously, is a key component of our frozen handheld and spreads. And what I would tell you is having chosen not to repeat some of the promotional activity, the behavior of the categories themselves as well as competition within there continues to be mostly rational. We're not seeing unusual activity. In the peanut butter category, specifically, obviously, we're the leader in both categories. And some of the softness that you have seen in the peanut butter category was in part driven by some volatility. There have been some weather events, some stock up because of storms and so forth.

We do not believe that this is structural in the peanut butter category. We think that those are generally one-off events, and we will continue to focus on our leadership position in the peanut butter category by continuing our strong share of voice and brand building efforts and just reminding the group that we do play across that entire segment. So having the leading stabilized peanut butter and then also 4 of the 5 leading brands of natural and organic peanut butter, we are well positioned. And then notably, we just launched this Jif Simply product, which is a limited ingredient stabilized peanut butter, which again, is intended to lead where the consumer, in some cases, is moving towards. So we feel very good about the portfolio in peanut butter and spreads broadly. And then over the coming year plus we will continue to make strides to improve our Fruit Spreads business as well. But I would think about both the Peanut Butter and Jam segments as foundational to our total Frozen Handheld and Spreads business.

Great. Really appreciate all that color. And then on Uncrustables and the Fridge Friendly format that we'll be launching very shortly. Just curious if, one, if you've got any insights on how -- on retailer reception and maybe even pipeline fill and then how that is working. And then also if you're able to quantify what exactly is embedded in your outlook from this innovation. And as also relaying just any difference in the margin profile of the Fridge Friendly versus the [ core part ].

So first of all, thanks for the question. Great reception on Fridge Friendly, right? So both consumers and customers look to be very excited about that. Keep in mind that all Uncrustables will be fridge friendly. So we are transitioning every sandwich to that format and the entire portfolio probably in the mid-summer time frame were very close. Everything you see in the stores should be pride friendly.

Max, as you think about Uncrustables now being a $1 billion brand total company, our outlook for that business for FY '27 is mid-single-digit growth, which is really driven by volume mix momentum just partially offset by some strategic investments. And then as you think about the composition of the portfolio, about 75% of Uncrustables go through traditional U.S. retail sales and the balance of 25% go through Away From Home, we'll see a slightly faster growth rate in Away From Home, just based on its relative size and incremental opportunities as we have prioritized over the years, the growth in U.S. retail ahead of Away From Home. But it continues to be a bright spot for the company and a very positive story and we see great momentum across the portfolio through innovation. And the one example of innovation is the Fridge Friendly.

Our next question is coming from Megan Clapp from Morgan Stanley.

Maybe to follow up there, Tucker, just on Uncrustables in terms of the strategic investments with price being down slightly. I believe you took a price increase on the brand. I think it was the first time in 3 years last year. So just in the context of that, can you maybe just unpack a bit more about where those investments are focused specifically?

Megan, over time, we've talked about the importance of advancing the volume growth momentum of the portfolio, both in traditional retail and Away From Home. And we're doing that through base distribution. We're doing that through innovation. And at times, we're also doing that through pricing as well. And pricing is not only strategic, but it's also to recover some inflation as well.

And so as we move forward, the important thing for us, and we've talked about this on the last couple of earnings calls, over the last few fiscal years is just to acknowledge that we need to continue to make sure that we have the right price and promotion, i.e., merchandising. We need to make sure that we advance marketing behind the brand. And we will continue to absorb ongoing manufacturing costs as we bring on additional capacity to support the future growth. And so this fiscal year is really just a demonstration of now growing off the $1 billion mark where we're seeing nice volume momentum, but we will strategically make the right decisions around pricing to support the brand in its growth and overall momentum in the portfolio.

Great. That's helpful. And then maybe a follow-up on tariffs. In the prepared remarks or in the release, you mentioned that the outlook does not assume any impact from tariff refunds at this point. Could you just maybe give any [indiscernible] around the potential opportunity there? Have you applied for refunds? I think it depends on whether you're in the direct importer of record or not. And just help us understand anything in terms of timing or magnitude that you could share? And if refunds were to materialize, would you expect that could flow through to the bottom line? Or would you be more inclined to reinvest some of that?

Yes. Megan, big picture, I would acknowledge that we experienced tariffs in FY '26, and we continue to experience tariffs at a 10% level in our FY '27 outlook. We are pursuing tariff refunds previously paid. But honestly, the scope and realization remains uncertain. And we've just made the decision not to factor any of these decisions into our outlook, and we're continuing to monitor and assess any changes to existing tariffs or new tariffs, and we'll continue to provide updates over time. But I think at this point in time for us to make any declarations is probably not appropriate just as we navigate the overall environment.

Your next question is coming from Scott Marks from Jefferies.

First thing I wanted to ask about, just in the quarter, as we think about both the Frozen Handheld segment and the Pet segment profitability, I think they came in materially ahead of what folks were expecting. Just wondering if you can help us understand the drivers of that and maybe quantify the magnitude of contribution from those drivers?

Yes. We had roughly a $0.15 sort of overdelivered expectations in our fourth quarter of last fiscal year. And I would say we saw some volume benefit, we saw a little bit of an improvement in our gross profit margin and then we work to control our SG&A expenses in the quarter.

What we saw in the fourth quarter on frozen handheld and spreads was just nice momentum across our Uncrustables portfolio as we continue to support and advance that brand. And Pet came in nicely just due to the underlying momentum in Meow Mix seeing some signs of stability in snacks, but also acknowledging to their ability to control costs in the quarter as well. And I just think those elements enabled us to finish a strong fiscal year and carry that momentum into our current fiscal year as we announced our guidance today.

Okay. Appreciate the color there. And then just second one for me. I know you gave some commentary around Q1 expectations as well as expectations for Coffee segment, kind of top line cadence through the year. As we look maybe through the rest of the business, the other segments, marketing spend, SG&A, how should we be thinking about cadence as we progress through fiscal '27?

Yes. So as you think about earnings per share, we talked about a kind of a mid-teens Q1. I would just acknowledge that our second quarter will be better than mid-teens. And then our third quarter would be sort of low single digits. And then our fourth quarter would be flat to slightly down as you think about the flow over the year, and again, that will change directionally because we're not trying to sort of articulate quarterly guidance, but we understand that you kind of have to model sort of the outlook. So hopefully, that provides some context. And we're certainly happy to follow up with you post call here.

Next question is coming from Rob Dickerson from BTIG.

Just to circle back on coffee, I guess, one more time. Tucker, just given all the comments you've already made on the call today, it's a very easy clarification question. I know you had stated in the prepared remarks that retail coffee will return to the high 20s in fiscal year '27. But clearly, it sounds like the real benefit starts to come through in Q2. So I'm assuming the assumption here is that Q1 is a little bit more muted and then really that benefit in high 20s is really like a Q2 to Q4. Is that fair?

You're correct.

All right. Simple enough. All right. And then just -- I guess, just to kind of touch on capital structure, kind of where you stand, haven't talked about yet in the call. Did almost $1.2 billion of free cash flow in '26, which was great, almost company high. Now we're looking for, I guess, around $1 billion in fiscal '27 inclusive of probably some of the inventory benefits, especially on Coffee. And you just paid down, I think, $500 million or so in debt in the back half of the year in '26. So kind of like as we think about any capital, real capital needs in '27 vis-a-vis the free cash flow. Like is this -- are we at a point now or maybe you feel pretty good about your leverage? You don't have as much of a deleverage need. And I know you kind of called out the guidance excludes any type of share repurchase. So just trying to get a view as to -- got to where you would like to place any of the excess capital and kind of how that relates to where the [indiscernible] stock price is.

Yes, Rob, we remain committed to our financial priorities and policies and to generating $1 billion or greater in free cash flow in support of our cash deployment model. And as you noted, in fiscal '26, we had $1.2 billion of free cash flow. That benefit enabled us to pay down over $700 million of debt and pay just over $450 million of dividends. So as we move forward, we remain committed to free cash flow generation after capital expenditures, which are roughly flat year-over-year at $325 million. We want to make sure that we support the quarterly dividend and grow it where and when appropriate.

We also acknowledge, too, that we want to pay down an additional $500 million of debt because that will support getting down to around a 3x leverage profile by the end of this fiscal year. And as a reminder, we exited this past fiscal year around 3.8x. As we began to achieve our leverage objectives, that opens up additional opportunity for capital or cash deployment where we could contemplate potential share repurchases in the future.

We've reached end of our question-and-answer session. I'd like to turn the floor back over to Mark for any further closing comments.

Thank you, and thank you all for joining us this morning. As we shared in our prepared remarks, our fiscal year '26 results highlight the strength of our focused strategy and portfolio optimization efforts, and our differentiated portfolio is delivering results.

We are pleased with the momentum of our portfolio as we enter fiscal year '27. Our focus is on our 3 strategic priorities of driving focused organic volume growth across our key platforms, improving profitability and accelerating earnings growth for the company and maintaining a disciplined approach to capital deployment. Our strategy is working, and the strong foundation we have established gives us confidence in our ability to increase shareholder value and deliver long-term growth for the company.

In closing, I would like to thank our employees for their unwavering focus, dedication and outstanding contributions. Their efforts continue to drive our momentum and position us for future success. Have a great day.

Everyone, this concludes our conference call for today. Thank you for participating, and have a nice day. All parties may now disconnect.

Good morning, and welcome to the J.M. Smucker Company's Fiscal 2026 Third Quarter Earnings Question-and-Answer session. This conference call is being recorded. [Operator Instructions] I will now turn the conference call over to Crystal Biden, Vice President, Investor Relations and Financial Planning and Analysis. Thank you. You may begin.

Good morning, and thank you for joining our fiscal 2026 3rd quarter earnings question-and-answer session. I hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website at jmsmucker.com. We will also post an audio replay of this call at the conclusion of this morning's Q&A session.

During today's call, we may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties.

Additionally, we will use non-GAAP results to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning's press release. Participating on this call are Mark Smucker, Chief Executive Officer, President and Chair of the Board; and Tucker Marshall, Chief Financial Officer, Executive Vice President, frozen handheld and spreads and Sweet Bake Snacks.

We will now open the call for questions. Operator, please queue up the first question.

[Operator Instructions] Our first question comes from Andrew Lazar with Barclays.

Mark, is I'm curious, maybe in your discussions thus far with Elliott, I'm curious where maybe you are seeing the most common ground and where maybe the biggest opportunities are going forward? Is it potentially in more aggressive portfolio optimization? Or maybe should we be thinking more on the cost side and sort of capital allocation fronts.

Thanks, Andrew. The engagement with Elliott is recent and has actually been very constructive. We've had a number of meetings with the folks there. And largely, what they see is what many of you already know, we're a great company with strong brands. And there's really good alignment between what they're seeing and what we are seeing focusing on continuing operating improvements, which will lead to profit restoration over time, the continued portfolio management in the near term, focusing on organic growth, also disciplined capital allocation.

And then lastly, governance. And as you know, we do and have continued a pretty consistent Board evolution over the last 5 years. And these 2 recent additions of Bruce Chen and Dave Singer, will further that governance and in particular, making sure that we have the right support in terms of how we're thinking about capital allocation and our financial priorities. So really feel very good about where we are in the conversations with Elliott and very confident that we have both the right board and the right team to continue to drive our strategy and the growth of the company.

Great. And then you already discussed, I know some of the change in promotional strategy in sweet baked snacks at CAGNY last week. But maybe I'd love to dig in just a little bit further on sort of what you're really trying to accomplish with this move and maybe what you're hoping to learn about the business through this action.

Sure, Andrew. I mean, again, we are going to continue to focus on stabilizing the brand and return hoses to growth over time. That includes strengthening the portfolio. As you know, we've done some SKU rationalization, really staying focused on the icon brands of cupcakes, twinkies and doughnuts. Continuing to, as I just mentioned, improved operations, which will ultimately lead to improved profitability. And then just taking a prudent approach to the investments in sweet baked snacks to ensure that we're balancing both top top line stabilization and profit improvement. .

And of course, we did take an updated assumption of 2% growth trajectory going forward, but we are continuing at this time, just to stabilize the business.

Our next question comes from Peter Galbo of Bank of America.

Mark and Tucker. Thanks for the question. Mark, maybe just to dovetail off of that. I noted in the profile on Bruce specifically, just his background in M&A. So just the thought process there of his experience, whether that could maybe accelerate a more portfolio reshaping? And then just like how you would think about use of proceeds. I think in the past, again, we know the debt paydown piece, but in the past, as you parted with businesses, you've been willing to kind of return that in the form of share repurchase and just how that whole framework is entering your mind.

Sure. Yes. We've been in conversations with Bruce for some time and just feel very good about his financial acumen. And as it relates to the portfolio, as you know, we've been very consistent over the years in making sure that all of our shareholders understand that we always are reviewing our portfolio. We really like our portfolio because of the diversity. It obviously pet and coffee and then food and snacking, we have -- we play across multiple categories. So the diversity does give us optionality and as we've been very disciplined over these past years in reshaping our portfolio, that's something that we will continue to think about as we move forward.

As it relates to use of proceeds, we would just acknowledge historically, we've used proceeds from divestiture activity to either pay down debt or to repurchase shares as we continue on our path to 3x leverage or below by the end of next fiscal year, that enables the opportunity to consider share repurchases again.

Great. And Tucker, maybe just to pivot to the business and coffee specifically, I think at CAGNY, you had some remarks about near-term margin improvement that was predicated on some of the deflation in green coffee costs. You have a peer who obviously participates in the space that kind of talked about a recovery in some of the profit metrics in like the second half of calendar '26. And I know your fiscal is a bit different, but maybe you could put some guardrails around how you're thinking about that coffee deflation entering the P&L from a calendar '26 perspective?

Sure. Peter, the outlook for our coffee portfolio is positive. It starts with the resilience and the strength of the category and also the performance of our brands. And we don't disclose our hedging on our cost position, but we do hedge for flexibility to support annual profit delivery. And we would just share that, as we mentioned at CAGNY, deflation benefits both the absolute profit dollar and the profit margin percentage. And additionally, we will be lapping the impact of tariffs and so we would anticipate profit and margin improvement as we move forward.

And in the fourth quarter of this fiscal year, we would expect a mid-20s segment profit margin. And so hopefully, this continues to inure to the benefit of the portfolio and the profitability of the portfolio.

Our next question comes from Peter Grom of UBS.

Great. So I was hoping to get some perspective on the top line trajectory. Maybe first, as it relates to Sweet Baked Snacks, you touched on some of the drivers around the 4Q low double-digit decline. But I'd be curious how we should be thinking about fiscal '27 in the context of this exit rate would you anticipate some of the changes you're making to drive stronger growth? Or is this kind of low double-digit decline a fair run rate as you move into the first half of next year? .

Yes. Peter, I certainly appreciate the question, particularly as it relates to the growth trajectory on Sweet Baked Snacks. I'll just share that it's early for us to lean into what the outlook is for FY '27. We have acknowledged that our fourth quarter will be a softer quarter for the portfolio. Just as it relates to some of the category trends that it's navigating, but also as it overcomes a temporary disruption associated with a plant or manufacturing fire.

And so I would just sort of think through that we continue to advance the stabilization efforts across that portfolio to improve our share of market performance. We've obviously worked through some of the SKU rationalization efforts. We'll continue to improve profitability across that portfolio. We'll begin to see the benefits of our recent plant closure, the Indianapolis facility, and we'll continue to look toward advancing growth over time. but this continues to be a journey as we navigate the stabilization of this portfolio.

Awesome. And then I guess just A follow-up on coffee. There was some commentary earlier this week from one of your peers on some retail inventory dynamics happening in pods that they are expecting to impact their growth in the first half of the year. So -- is this a dynamic that you are seeing or contemplating in your guidance.

No, Peter. We haven't seen any abnormalities in terms of inventories on coffee. Our coffee business continues to perform very well. and obviously delivered great growth on Bustelo and we'll continue to do the right thing for our coffee business.

Our next question comes from Robert Moskow with TD Cowen.

Thanks for the question. I was hoping to drill down even further into the coffee pricing strategy and maybe ask you to delineate between ground coffee and the single-serve pods. As your costs come down, would it be fair to say that the give back on pricing would be more on the ground coffee than it would be on the pods just because of how it plays out on a percentage of cost of goods.

Yes, Rob, I think it's early for us to talk about sort of the magnitude of deflation and its implication to pricing. But as you know, roast and ground is a greater percentage of coffee in the can as compared to in a single-serve K-Cup and so we'll continue to navigate the level of deflation and how we address deflation in our portfolio as we move forward. But I guess I would just leave it there.

Rob, it's Mark. The only thing I would maybe just build is that we've been pretty consistent over the years, highlighting that the profitability and the margins across the coffee portfolio are generally similar.

Okay. And can I ask a follow-up on Hostess and Sweet Baked Snacks in general. Since you bought the business, a lot of the management team and probably the next layer level down has left the business. And I'm just wondering, like -- do you think that you need to make a bigger investment in talent or capabilities in order to stabilize the business? And has that -- have those departures do you think contributed to some of the the weakness in the division.

No, Rob. I'm very confident that we have the right team in place on Hostess, some of the best and brightest. I think what we're navigating is both the category dynamic. And then just as Tucker mentioned, just some operational challenges that we've had. We are through the [indiscernible] closure, which as you know, was a bit more costly than we had anticipated, but that is largely behind us. And so our focus now is to maintain and improve the operating efficiencies and then to continue to make prudent investments on those parts of the branded Hostess portfolio that are truly going to help to stabilize the business and then ultimately get us back to some growth. .

Our next question comes from Thomas Palmer of JPMorgan.

Thanks for the question. I think my questions are not going to be totally different than the 2 topics we've addressed so far. But just first on Sweet Baked Snacks. I think a quarter ago, the message was that the earnings pressures would be greatest in the second quarter, and then we'd see sequential improvement. So what really -- I know there's the plant fire in 4Q, but what really were the incremental items to think about in 3Q that drove the weakness? I know you've mentioned the plant closure. Was that it? Or were there other items to really consider? Because I'm trying to think through the ultimate recovery here and kind of how much is simply volumes need to reverse versus you have kind of a clear line of sight operationally?

Tom, what we would offer in our third quarter is top line did come in below our expectations, largely due to category trends, some of our own execution and then I would also share that our bakery network cost came in much higher than we anticipated. And those 2 things really worked against the profit expectation of sequential improvement as we move through this fiscal year. And I would just say that our fourth quarter should be better, but it will absorb the impact of the fire in the month of February, both at top line and bottom line.

Okay. And on coffee, and I apologize if I missed this. You have been providing some kind of clear guidance over the expected coffee impact in fiscal '26. I think last time it was -- and even last week, you were discussing a $0.50 unmitigated tariff headwind. And then coming out of the second quarter, the coffee elasticity was expected to be a $0.40 headwind. Just any update on these items expected impact now as we think about fiscal '26 and especially when it comes to the tariff headwind -- is that an item we should essentially think about reversing in full as we look at next year, given it's unmitigated?

Yes, Tom. So a couple of parts to break down there. Let's begin with tariffs. So we did call out a $75 million unmitigated tariff impact that was affecting this fiscal year that we would be lapping next fiscal year. So you can add that back to exit segment profit for this fiscal year. Then we would also just acknowledge while we didn't update our elasticity impact in this call, we would just say that elasticities came in better than anticipated in our third quarter and we continue to take a prudent approach to forecasting elasticities, excuse me, in our fourth quarter. .

Our next question comes from Chris Carey of Wells Fargo Securities.

I do want to ask one follow-up on the Sweet Baked snack segment. And I promise my other question will be something else. But I think the organic sales in the quarter were pretty substantially below consumption, at least on our data. Why was that? What drove the gap between consumption and what you reported. And I just wonder if we should expect that going forward? And then just connected, when you talk about fiscal '27 being on algorithm or potentially better, within that statement, how are you ring-fencing the Sweet Baked Snacks segment because back to Tom's point, obviously, a quarter ago, there were different expectations than what played out. So just trying to understand the the cushion in that fiscal '27 statement as it pertains to [indiscernible].

Yes. So Chris, we -- your first question on Sweet Bake Snacks, I think we saw some timing around operational efficiencies and consumption just as we've navigated sort of the resetting of the bakery network. We've also reset promotional activity in the back half on that business, where we've pulled promotional activity largely in support of them putting it back in to make sure that we're getting the most efficiency out of that spend. .

And then as you step into next fiscal year, I think it's hard for us to sort of communicate at this time, the trajectory of the top line of the business, but we should begin to build back profitability because we're at such a low watermark at this point in time.

Okay. In the Pet segment, for the quarter, you were lapping some headwinds from the year ago period in the top line. How should we think about the performance for PET in the quarter. I think it came in a bit light of expectations, perhaps those expectations were a function of that compare in the base period. So I wonder if you could just maybe contextualize how you all felt about delivery in the quarter and whether there already shortfalls relative to your own expectations?

Sure, Chris. It's Mark. Overall, very pleased with the Pet performance. I think Meow Mix continues its growth trajectory, still the #1 leader in dry solid consumption, 5% top line growth in the quarter. Innovation is performing well. The gravy bursts platform that we've launched has done well, and we're actually expanding that with some new items.

Milk-Bone specifically did start to grow again in the quarter, which is what we wanted to see, was supported by base biscuits. We did see some decent growth in base biscuits, which is important. And then the innovation there was the peanut buttery Bites platform, and we talked about a new iteration of that innovation at CAGNY, that innovation continues to perform well. The tail of the pet business, which is Paparony and Canon-Carryout continues to be soft, largely driven by competition and private label, but we have begun a brand refresh on pop and continue to invest in marketing to support the business. And we do see strong loyalty there. So we think that will take time, but just keeping in mind that our focus on dog snacks will continue to be on Milk-Bone and in that brand, specifically playing across multiple segments, both premium to value and different need states for dogs.

So Milk-Bone will continue to be sort of the crown jewel, and we'll continue to focus there and continue to drive growth as we seek to stabilize the Popperoni business.

Our next question comes from the line of Max Gumport of BNP Paribas. Please proceed.

I've got one more on sweet baked snacks to throw in on the profit side. So I recognize that this year has been impacted by a number of discrete items and also that you've brought down the long-term sales growth target for the business. It felt like you had a clear path to returning to a 20% segment profit margin for Sweet Baked Snacks, if not in 4Q, then sometime soon. So not asking you to put a time line on it. I'm just curious you have any color you can provide on what you view now as a reasonable normalized segment profit margin for Sweet Baked Snacks whenever you get back to that normal period.

Max certainly understand the question and obviously, profitability is below our expectation.

[indiscernible] Being booked under it. But just curious for an update on how you view these trends for [indiscernible].

[indiscernible] the numbers. It will continue to be a key growth driver for the company. Our distribution gains most recently in [indiscernible] and C-store having tripled our C-store sales and continuing to add new households on the order of like $3.5 million. [indiscernible] The category and specifically the [indiscernible] brand.

Our next question comes from Megan Clapp of Morgan Stanley. .

A couple of quick ones for me. On the EPS guide, you kept the guide. It's still quite wide, I think, for this point in the year. I think historically, you've narrowed it a bit with 1 quarter left. So -- you narrowed the top line, can you just talk about the decision to keep the EPS range where it is and whether you're tracking towards one end or the other at this point?

Sure. I think we're just continuing to maintain [indiscernible] we remain most confident at the midpoint.

Okay. Great. That's helpful. And then just on the SG&A, I think it's now you're expecting flat to slightly down versus flat prior. Can you just unpack a little bit more what changed there? Is that just efficiencies coming in better than you expected? Or are you pulling back in any certain areas that maybe would need to come back next year?

Yes, Megan, they're largely driven by efficiencies and just prudent management of spend. .

Our next question comes from Alexia Howard of Bernstein.

Thank you for the question. Can I just follow up on Megan's question just there about the SG&A line. I think in the prepared remarks, you commented that you had lower marketing and distribution spending this quarter but higher selling expenses. Is that a signal of a continuation of that kind of trend going forward out into next quarter and perhaps out into fiscal '27? Or should we expect some normalization of that.

No. We just had some savings in timing in our third quarter. Again, that supported the overdelivery in EPS. We've essentially locked that into our earnings guidance for the year, but we have some top line softness coming through associated with the Emporia, Kansas fire. And so that's kind of muting some of the savings from a bottom line standpoint. But there's there's nothing substantial to report an additional savings that will come through our fourth quarter.

And then on the pace of innovation, have you quantified recently where you're at in terms of new products as a percent of sales and where you would hope to get to over time over time? Are you where you want to be on the innovation front now?

Alexia, I'm not 100% sure I understood the question. Let me try to answer it and then please come back the -- it's Mark, of course. Innovation is actually performing very well. We've gotten -- as we always do, listening to the consumer, making sure that we understand what their needs are and trying to meet them as quickly as possible. .

I mentioned some of the pet innovation even on Hostess, despite some of the challenges we've had in that business, the innovation there has actually performed well. It's also true in Bustelo, Uncrustables, and a lot of the innovation that we've -- that has been successful is generally closer in innovation as opposed to big bet innovation, and that has really driven growth and help to support the top line.

That's helpful. And the overread pace, the proportion of sales that are coming from new products, is that where you want it to be now?

Yes, it's in line, for sure. .

Our next question comes from Scott Marks of Jefferies.

First thing I wanted to ask about just on the dog snacks side of the business. You made a comment in the prepared remarks about the category as a whole rebounding. And just wondering if you can kind of help us understand a little bit about what's going on there? And what's changed relative to some prior quarters where you've called out some discretionary spending pressure on the consumer.

Sure. Scott, it's Mark. Yes, both of the categories that we participate in pet are doing very well. And in particular, dog snacks has continued to grow. A lot of that growth has been driven by the humanization and premiumization trends in pet. So to the extent, as I mentioned in Alexia's last question, the innovation that has been delivering is delivering against that premiumization concept. .

In addition, as I mentioned earlier, we have been pleased with the base biscuit performance, which is the more affordable, more value-oriented part of the portfolio. So we -- our strategy is to continue to make sure that we're winning in the different segments within that category and continue to follow both consumer needs and where the growth is.

I appreciate the color there. Last one for me would just be regarding the Uncrustables business, you made some comments in the prepared remarks just about distribution runway in some of the away-from-home channels, talk about convenience channels. Maybe how should we be thinking about kind of the, I guess, more traditional channels just in terms of distribution runway left versus maybe innovations on shelf?

Just trying to contextualize how we should be thinking about maybe velocity improvements versus innovation in some of the larger more mature chances for that business.

Yes. In the traditional U.S. retail channels like grocery and mass, our distribution has expanded over the last year as we've actually gained more freezer space [indiscernible] they're doing very well and then continuing to drive household penetration where we still feel there is some runway.

Next question comes from Steve Powers of Deutsche Bank.

Thanks very much, and good morning, everybody. Most of my questions, I think, have been addressed. It's been a nice complement today to what you said at CAGNY. So thank you for that. I did have one, I guess, more technical question though on Sweet Baked Snacks, it's probably for Tucker. Specifically, I just want to ask around the decision to start regularly amortizing the Hostess trademark beginning in the fourth quarter. Just maybe you could talk a little bit about the trigger for that and I guess, over what period of time you're now assuming that brand will, I guess, effectively depreciate.

Yes. So as we have looked across the portfolio and as we continue to evaluate the direction of the Sweet Baked Goods category and our brands and brands in that category we have slowed the growth rate from our original expectations at the time of acquisition. And now we have a long-term growth rate of 2%.

As we've reduced that growth rate, and Mark shared in his comments and also in Q&A, we want to continue to take a prudent approach to how we invest behind that business and those brands and how we allocate resources, not only to that aspect of our portfolio, but how we allocate resources toward our broader portfolio.

It just came to us that we should begin amortizing that brand over a longer period of time versus it being an indefinite lived on. And that's really what we were trying to signal in my prepared remarks here today. So hopefully, Steve, that just provides some additional context.

It does. Maybe it will be in the [indiscernible], but is there a life just a rate, I guess, a time span of depreciation or amortization we should be thinking about?

Yes. So our outlook for amortization for the full year is now $210 million. That includes the step-up in amortization that begins in the fourth quarter by putting that brand on a life and we will continue to provide updates as it relates to that amortization as we move forward.

There are no further questions. I'll pass the call back over to management for any closing remarks.

Well, thank you for your time and for joining the call this morning. It was great seeing many of you at CAGNY last week, where we outlined our objectives focused on continuing to advance our long-term growth strategy and furthering momentum of our portfolio of leading brands, improving profitability and earnings growth and continuing a disciplined capital deployment scheme. .

Our results demonstrate our strategy is working, and we continue to take deliberate actions to advance these objectives. I'm confident that we have the right strategy and leaders in place to create value for our shareholders, and none of this would be possible without our dedicated employees for their unwavering commitment and outstanding talents and contributions, and I would like to thank them for their continued hard work and dedication to our company. Have a great day, everyone.

Everyone, this concludes our conference call for today. Thank you all for participating, and have a nice day. All parties may now disconnect.

Good morning. This is Crystal Beiting, Vice President, Investor Relations and Financial Planning and Analysis for The J.M. Smucker Company. Thank you for listening to our prepared remarks on our fiscal 2026 third quarter earnings call. After this brief introduction, Mark Smucker, Chief Executive Officer, President and Chair of the Board, will provide a business and strategy update. Tucker Marshall, Chief Financial Officer, Executive Vice President, Frozen Handheld and Spreads and Sweet Baked Snacks, will then provide a detailed analysis of the financial results and our updated fiscal 2026 outlook.

Later this morning, we will hold a separate live question-and-answer webcast. During today's discussion, we will make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, please note, we will refer to non-GAAP financial measures, which management uses to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP financial measures in this morning's press release.

Today's press release, a supplementary slide deck summarizing the quarterly results, management's prepared remarks and the Q&A webcast can all be accessed on our Investor Relations website at jmsmucker.com. We invite all interested parties to join us at 9:00 a.m. Eastern Time today for a live question-and-answer session with management to further discuss our third quarter results and outlook for the full 2026 fiscal year. Please contact me if you have any additional questions after today's question-and-answer session. I will now turn the discussion over to Mark Smucker.

Thank you, Crystal, and good morning, everyone. In the third quarter, the company's positive momentum continued, and our results exceeded our expectations. We delivered another quarter of strong top line growth, driven by the ongoing demand for our leading and iconic brands and higher growth brands as we continue to realize the benefits of our transformed portfolio. Our bottom line performance reflects disciplined cost management, and we delivered sequential improvement in adjusted earnings per share.

As we look ahead, we are focused on 3 distinct objectives. First, we will continue to advance our long-term growth strategy and further the momentum of our portfolio of leading brands. Second, we are highly focused on improving profitability and driving earnings growth across the company. And third, we remain committed to a disciplined capital deployment model that prioritizes organic growth opportunities, debt paydown and shareholder return in the form of dividends and share repurchases, while maintaining our current investment-grade debt ratings.

Each of these objectives builds on how we have transformed our portfolio through a focused strategy centered around engaging and delighting consumers by participating in attractive categories, building brands consumers love and being everywhere consumers shop. This approach has created a complementary and cohesive portfolio across the company, supported by our enterprise-wide marketing capabilities, disciplined commercial execution and a connected manufacturing and supply chain network.

Our third quarter results continue to demonstrate that our strategy is working. Total company comparable net sales increased 8%. And when excluding contract manufacturing sales related to the divested pet food brands, net sales increased 9% versus the prior year. Nearly 2/3 of our portfolio is growing or maintaining dollar share while more than 3/4 is growing or maintaining volume share in measured retail channels. We are focused on continuing this momentum by prioritizing resources towards our largest growth opportunities: the Uncrustables, Cafe Bustelo, Milk-Bone and Meow Mix brands. I'll dive deeper into each of these.

Starting with the Uncrustables brand, which grew net sales 10% at the total company level. This fiscal year, we expect to achieve our $1 billion annual net sales aspiration for the Uncrustables brand. The brand has added approximately 3.5 million new households over the past year and continues to over-index to households with kids and millennials. With household penetration at just 26%, we continue to see a long runway for growth. We are fueling this momentum through consumer-led innovation and being everywhere the consumer shops.

In innovation, we recently announced fridge-friendly Uncrustables sandwiches, which will be available across all flavors starting this summer. Now in addition to being kept in the freezer, all Uncrustables sandwiches will be able to be kept fresh in the fridge for up to 5 days, making it easier to enjoy at a moment's notice, increasing convenience and expanding usage occasions. We are also expanding into morning occasions through our Uncrustables sandwiches that offer 12 grams of protein, Up & Apple and Bright-Eyed Berry. These new varieties access an entirely new daypart for the Uncrustables brand focused on breakfast and morning snacking while also meeting the needs of consumers who are increasingly prioritizing protein throughout the day.

These new varieties are off to a strong start, recently achieving $1 million in weekly measured retail dollar sales. We will build on this foundation and plan to expand the platform this spring with a new blueberry flavor. As we look to expand availability, the convenience channel offers a unique opportunity for an immediate consumption occasion. While still early, we have tripled monthly measured retail dollar sales for the Uncrustables brand in this channel versus the prior year. Uncrustables sandwiches are in the top 10% of fastest-growing brands in dollars and units across all categories in the convenience channel over the past year, and we expect to significantly expand distribution over time.

We are building a truly iconic brand with widespread multigenerational appeal, which we expect to become a top 3 brand in the total freezer aisle. Our next key growth platform, the Cafe Bustelo brand continues to deliver strong results and remains one of the fastest-growing brands in the at-home coffee category. The brand gained both dollar and volume share in every segment in which it competes, including the mainstream, pre-pack, one cup and instant categories in the latest 13-week period.

Net sales for Cafe Bustelo increased 46% within our U.S. retail coffee portfolio, including a 20% increase in volume mix. Growth has been driven by expanded distribution and increased marketing investments. The brand is resonating particularly well with Gen Z and Millennials and is further supported by our innovation strategy. Last summer, we introduced new roast profiles to expand the brand from its traditional espresso brew to blends that can be brewed more easily in traditional drip brewers, appealing to younger, more diverse buyers while remaining inspired by its Latin roots.

Through our brand-building efforts, we continue to see strong growth in brand awareness and household penetration, both of which have significant runway for continued growth. This fiscal year, we expect the brand to surpass $500 million in net sales, an increase of more than $100 million versus the prior year, driven by both volume and pricing. We continue to make progress on our ambition to make Cafe Bustelo a top 4 brand in the at-home coffee category.

For the Milk-Bone brand, net sales increased 3% in the quarter within our U.S. retail pet portfolio. In the latest 13-week period, the brand grew in both volume and household penetration. Growth was supported by our strategy to maximize and win everyday treating, amplify brand love with new pet parents and expand consumption through impulse opportunities across innovation and seasonals. As the leading brand in dog snacks, we are fueling the humanization trend through innovation, premiumization and evolved messaging.

We are strengthening our core business value proposition with updated packaging to highlight protein and other functional benefits, while expanding premium offerings through the Milk-Bone Peanut Buttery Bites platform. This collaboration between the #1 dog snacks brand and the #1 peanut butter brand has been highly successful. Milk-Bone Peanut Buttery Bites was the #1 dog snacks launch over the past 4 years, and we are excited to expand the platform with Peanut Buttery Cups launching next month.

In cat food, the Meow Mix brand continued to see strong growth with both net sales and volume mix increases in the quarter. In dry cat food, the Meow Mix brand continued to outpace the category in sales and drove incremental household growth in the latest 13-week period. Growth continues to be supported by distribution gains, innovation and marketing investments behind our multiyear Meow Mix remix campaign. Consumer-led innovation remains a key driver of our growth. Meow Mix Gravy Bursts combines the convenience of dry cat food with the excitement and taste of wet cat food. The offering continues to exceed expectations and was the #1 dry innovation launch in the category in 2025.

Building on this success, we are expanding the platform with Gravy Bursts Salmon Flavor Cat Food and Gravy Bursts Chicken Flavored Treats, now available in stores. The momentum we are seeing across the Uncrustables, Cafe Bustelo, Milk-Bone and Meow Mix brands underscores the strength of our strategy and the quality of our portfolio. These brands represent durable growth platforms supported by consumer-led innovation, strong brand equity and enterprise-wide marketing capabilities. Importantly, they are driving growth today while strengthening our long-term value creation potential. As we continue to invest behind these platforms, we are confident in our ability to sustain this momentum and build leading and iconic brands that play key roles in the life of the consumer.

Turning to the dynamics in our U.S. Retail segments. In Coffee, net sales increased 23%, driven by increases across all formats and brands. Our portfolio is performing well, and we continue to demonstrate our ability to recover increased commodity costs through responsible pricing. Due to higher costs and the pass-through nature of the coffee category, we took a price increase in both May and August of this fiscal year. Since then, price elasticity of demand trends have been favorable to our expectations, demonstrating the strength of our portfolio and the resilience of the at-home coffee category.

From a profit perspective, we will not fully recover green coffee tariff costs incurred in fiscal year 2026. However, given the recent changes to U.S. trade policy to exclude tariffs on green coffee, we will lap these costs next fiscal year. Additionally, we are now starting to see moderation in green coffee futures supported by positive signs for next year's crop. Given the pass-through nature of the coffee category, during a period of sustained deflation, we have historically lowered prices and total profit has benefited from the favorable impact.

In Frozen Handheld and Spreads, net sales increased 2%, reflecting an increase for Uncrustables sandwiches and Jif peanut butter and a decrease in Smucker's fruit spreads. Net sales for the Uncrustables brand grew 6% in the quarter. We continue to make strategic investments behind this key growth driver for the company, and we are confident in the brand's long-term growth potential. In spreads, we are evolving our portfolio to meet the needs of the consumer, and one example is Jif Simply. This innovation is specifically designed to meet the evolving health preferences of today's consumers, delivering a simple, limited ingredient recipe without compromising on the taste consumers love. We see a clear opportunity to modernize our spreads portfolio and to elevate everyday meal and snack occasions.

In Pet Foods, net sales decreased 1%, reflecting a decline for the Pup-Peroni brand and lapping contract manufacturing sales related to the divested pet food brands in the prior year. The Meow Mix and Milk-Bone brands both grew net sales and volume mix in the quarter. The dog snacks category has rebounded in recent periods and cat food continues to demonstrate strong growth, creating a positive outlook for our portfolio.

Both categories remain highly attractive, supported by favorable category tailwinds, including; pet population trends, where we expect to see both dog and cat population growth over the long term; the continued humanization of pets, leading pet parents to treat their pets like members of their family, driving further premiumization opportunities; and e-commerce trends, a channel that continues to see strong growth and aligns with evolving consumer preferences, which benefits our portfolio.

With the #1 brands in dog snacks and dry cat food, Milk-Bone and Meow Mix, respectively, we are well positioned to build on these favorable category dynamics and accelerate growth through our proven brand-building model and innovation capabilities.

In Sweet Baked Snacks, the path to stabilization is taking longer than we expected. However, our focus remains on positioning the Hostess brand for eventual growth.

Third quarter results were below our expectations, driven by executional and operational challenges, higher costs and the impact of near-term actions we are taking to strengthen the business for the long term, which include: reducing our SKU count by 25% to simplify our offerings as we prioritize high velocity and margin-accretive SKUs. The majority of this work is now complete, and we anticipate the benefits from operational efficiency and improved customer service to largely benefit next fiscal year; the closure of our Indianapolis manufacturing facility, which will deliver approximately $10 million in cost savings this fiscal year and $30 million annually; and the strategic decision to reduce promotional activity from January to the end of the fiscal year for the Sweet Baked Snacks segment as we work to improve our operations and evaluate where the greatest return on investment will be for the brand going forward.

While these actions are expected to strengthen the segment and support long-term growth and margin expansion, they are creating near-term volatility in volume and profitability this fiscal year. Progress on our Sweet Baked Snacks stabilization strategy will continue to take time. With this in mind, we will take a prudent approach to investments in the business while ensuring we remain focused on our most compelling growth opportunities for the total company.

We remain focused on stabilizing performance and improving profitability in the Sweet Baked Snacks segment over time. Finally, in International and Away From Home, comparable net sales grew 12%. Growth was driven by the Away From Home business, which grew net sales double digits in the quarter. Our Away From Home business has seen tremendous growth as we continue to leverage our leading national brands and key growth platforms in Away From Home channels. We remain excited for the future growth opportunities in these channels across our brands and anticipate strong double-digit growth as the Away From Home business grows to approximately 10% of total company net sales this fiscal year.

Our third quarter results demonstrate our strategy is working, and we continue to take deliberate actions to advance our objectives of driving continued growth, enhancing profitability and disciplined capital allocation for the company. This includes the recent executive leadership changes, most notably the alignment of our business segments under Tucker and Rob Ferguson, 2 proven leaders with extensive strategic financial and operational experience, who will advance these objectives.

This morning, we also announced the Board appointments of Bruce Chung and David Singer as new Independent Directors, both of whom bring strong track records of value creation. These actions further our commitment to Board refreshment and follow constructive engagement with Elliott Investment Management. Alongside the rest of the Board, Bruce and Dave will support the work underway to advance our objectives, and I am confident we have the right strategy and leaders in place to create value for our shareholders.

In closing, I would like to thank our dedicated employees for their unwavering commitment and outstanding talents and contributions. With that, I'll turn it over to Tucker for additional insight on our financials and fiscal 2026 outlook.

Thank you, Mark. Good morning, everyone. I will begin by providing detail on the noncash impairment charges reflected in our third quarter GAAP results. We recognized a $508 million impairment charge related to the goodwill of the Sweet Baked Snacks reporting unit and a $454 million impairment charge related to the Hostess brand indefinite-lived trademark. These impairment charges are reflective of both near-term underperformance and a revised long-term expectations for both net sales and segment profit.

Our updated assumptions in conjunction with the underperformance of the Sweet Baked Goods category led to a reduction of the projected long-term growth rate to 2% for the reporting unit as well as the decision to begin amortizing the Hostess brand trademark in the fourth quarter. We remain focused on stabilizing performance and improving profitability in the Sweet Baked Snacks segment over time.

Now I'll provide an overview of our third quarter results, then give additional details on our financial outlook for fiscal year 2026. In the quarter, net sales exceeded our expectations, primarily driven by the strength of our U.S. Retail Coffee portfolio, partially offset by lower-than-anticipated net sales in Sweet Baked Snacks. Net sales increased 7%. Comparable net sales increased 8%, which excludes prior year sales related to the divested businesses and foreign currency exchange. Comparable net sales includes a $6 million headwind from lapping contract manufacturing sales related to the divested pet food brands in the prior year. The increase in comparable net sales reflects a 10 percentage point increase from net price realization, primarily driven by higher net pricing for coffee.

Comparable net sales also reflects a 2 percentage point decrease from volume mix, primarily driven by decreases for sweet baked goods and fruit spreads and lapping contract manufacturing sales related to the divested pet food brands in the prior year, partially offset by an increase for Uncrustables sandwiches. Adjusted gross profit decreased $28 million or 3% compared to the prior year. The decrease reflects higher costs, inclusive of commodity costs and tariffs, unfavorable volume mix, partially offset by higher net price realization.

Regarding tariffs, we realized approximately $79 million in expense in our third quarter, which primarily impacted our coffee portfolio in U.S. Retail Coffee and International and Away From Home. Adjusted operating income decreased $32 million or 7%, reflecting the reduction in adjusted gross profit and lapping favorable property taxes, partially offset by lower SD&A expenses. The decrease in SD&A expenses was driven by lower marketing and distribution expenses, partially offset by higher selling expense. Below operating income, net interest expense was comparable to the prior year as the impact of reduced debt outstanding was offset by higher overall interest rates. The adjusted effective income tax rate was 24.3%, compared to 23.7% in the prior year.

Factoring in all these considerations, along with weighted average shares outstanding of 106.9 million, third quarter adjusted earnings per share was $2.38, a decrease of 9% versus the prior year. Turning to our segment results. In the U.S. Retail Coffee segment, net sales increased 23% versus the prior year. Net price realization increased net sales by 23 percentage points, reflecting higher net pricing across the portfolio to recover increased costs. Volume/mix decreased net sales by 1 percentage point, reflecting decreases for the Dunkin and Folgers brands, partially offset by an increase for the Cafe Bustelo brand. U.S. Retail Coffee segment profit decreased 5%, primarily reflecting higher commodity costs and tariffs, unfavorable volume/mix and lapping favorable property taxes in the prior year, partially offset by higher net price realization.

In U.S. Retail Frozen Handheld and Spreads, net sales increased 2%. Net price realization increased net sales by 2 percentage points, driven by higher net pricing for Uncrustables sandwiches, partially offset by higher trade spend for peanut butter. Volume/mix was neutral to net sales, reflecting an increase in peanut butter, mostly offset by a decrease in fruit spreads. U.S. Retail Frozen Handheld and Spreads segment profit increased 4%, reflecting higher net price realization and lower preproduction expenses primarily related to the new Uncrustables sandwiches manufacturing facility, partially offset by higher costs and unfavorable volume/mix.

In U.S. Retail Pet Foods, net sales decreased 1% versus the prior year. Volume/mix decreased net sales by 2 percentage points, driven by lapping contract manufacturing sales related to the divested pet food brands in the prior year and a decrease for dog snacks, partially offset by an increase for cat food. Net price realization was neutral to net sales, reflecting higher net pricing for cat food, mostly offset by lower net pricing for dog snacks.

U.S. Retail Pet Foods segment profit increased 4%, primarily driven by lower marketing spend. In the Sweet Baked Snacks segment, net sales decreased 19%. Excluding noncomparable net sales in the prior year related to the divested Voortman business and certain Sweet Baked Snacks value brands, net sales decreased 11%. Volume/mix decreased net sales by 10 percentage points, reflecting decreases for snack cakes, donuts, and breakfast. Net price realization was neutral to net sales. Segment profit decreased 78%, primarily reflecting higher costs, unfavorable volume/mix, and higher marketing spend.

Lastly, in International and Away From Home, net sales increased 12%. Excluding $2.0 million of favorable foreign currency exchange, net sales increased 12%. Net price realization contributed 11 percentage points to net sales, primarily driven by higher net pricing for coffee. Volume/mix was neutral to net sales as increases for Uncrustables sandwiches and coffee were mostly offset by decreases for fruit spreads, portion control products, cat food, and peanut butter.

Net sales for the Away From Home business increased 15%, primarily driven by coffee and Uncrustables sandwiches. Net sales in the International business increased 6% on a comparable basis, primarily reflecting an increase in coffee. International and Away From Home segment profit increased 17%, reflecting higher net price realization, partially offset by higher costs, tariffs, and unfavorable volume/mix. Third quarter free cash flow was $487 million, compared to $151 million in the prior year, reflecting the increase in cash provided by operating activities and a decrease in capital expenditures as compared to the prior year. We finished the quarter with a cash and cash equivalents balance of $53 million and a total net debt balance of $7.3 billion.

Our trailing twelve-month adjusted EBITDA is approximately $1.8 billion, based on this, our leverage ratio currently stands at 4.1x. We plan to prioritize debt reduction by paying down $500 million of debt annually this fiscal year and next. With this expected debt reduction and overall business growth, we anticipate a leverage ratio at or below 3.0x net debt to EBITDA by the end of our fiscal year 2027. This level of leverage provides financial flexibility for a balanced approach to capital deployment and the opportunity to consider share repurchases.

Let me now provide an update on our outlook for fiscal year 2026. This guidance reflects the company's current expectations as it continues to operate in a dynamic and evolving external environment. Subsequent to our third quarter, a fire occurred at our Emporia, Kansas manufacturing facility resulting in a temporary disruption of production for our Sweet Baked Snacks business. We estimate the incident will reduce net sales by approximately $25 million in our fourth quarter of this fiscal year, which resulted in the change to our net sales outlook at the mid-point, relative to the previous guidance range. We are maintaining the adjusted earnings per share and free cash flow guidance for our fiscal year.

We now anticipate full-year net sales to increase 3.5% to 4.0% compared to the prior year. This guidance reflects a $135 million headwind from lapping sales of the divested Voortman business and certain Sweet Baked Snacks value brands, and a $38 million impact from reduced contract manufacturing sales related to the divested pet food brands as the arrangement was exited last fiscal year. We expect comparable net sales to increase approximately 5.25% at the mid-point of our guidance range which includes the unfavorable impact of the reduced contract manufacturing sales related to the divested pet food brands. This growth reflects higher net price realization versus the prior year, primarily due to pricing actions across our coffee portfolio in response to higher green coffee costs.

The increase in comparable net sales reflects volume/mix growth for the Cafe Bustelo, Uncrustables and Meow Mix brands and the Away From Home business versus the prior year.

Our fiscal year 2026 net sales guidance primarily reflects the following changes from our previous expectations: higher net sales in U.S. Retail Coffee for the fiscal year, reflecting better than anticipated net sales in the third quarter. We continue to expect our fourth quarter will demonstrate an approximately 20% increase from net price realization, partially offset by a high-single-digit volume/mix decline, reflecting a strong prior year comparison and timing of promotional activities; in addition, we now expect lower net sales in Sweet Baked Snacks reflecting updated business assumptions and the estimated impact from the recent fire at the Emporia, Kansas manufacturing facility in February. We now anticipate net sales in the segment will decline a low-teen percent in our fourth quarter given these factors.

We continue to anticipate an adjusted gross profit margin of approximately 35.0% for the fiscal year. We now expect SD&A expenses to be flat-to-slightly-down versus the prior year, primarily reflecting benefits from cost-saving initiatives and reduced spend across the company. Total marketing expense is estimated to be approximately 5.5% of net sales, reflecting an increase in absolute marketing dollars versus the prior year, which reflects increased investments for the Uncrustables and Cafe Bustelo brands.

We anticipate net interest expense of approximately $380 million and an adjusted effective income tax rate of 24%, along with a full-year weighted-average share count of 106.9 million. Taking all these factors into consideration, we are maintaining our full-year adjusted earnings per share guidance range of $8.75 to $9.25, with $9 at the mid-point. We continue to project free cash flow of approximately $975 million at the mid-point of our adjusted earnings per share guidance range, with capital expenditures of $325 million for the year.

Other key assumptions affecting cash flow include depreciation expense of approximately $350 million, amortization expense of approximately $210 million, share-based compensation expense of $35 million and other non-cash charges of $100 million.

In closing, we are pleased with our third quarter results and remain focused on maintaining a disciplined and responsible financial approach as we navigate this fiscal year. We are continuing to invest strategically in our key growth platforms and are confident in our ability to deliver long-term growth and increase shareholder value. Our earnings momentum this fiscal year is setting us up for an algorithm year, or potentially better, in fiscal year 2027, absent any significant changes.

I would like to express my sincere appreciation for our employees. Their commitment to executing with excellence, and their passion for our company positions us for continued success. Thank you.

All right, everybody. If we could find your seats, we'll kick off our next presentation.

We are thrilled to welcome back J.M. Smucker to the CAGNY stage.

Please first join me in thanking Smucker for again generously sponsoring the coffee beverages and snacks all week as well as the tasty Uncrustables provided entering the presentation room.

Smucker has delivered positive organic top line growth this year while navigating a dynamic macro environment, including record levels of green coffee inflation. Over the past several years, the company has reshaped its portfolio and is now benefiting from its unique portfolio of leading an iconic brands alongside higher growth brands. More recently, Smucker announced a series of leadership updates designed to advance the execution of its long-term growth strategy and further build momentum across their portfolio while enhancing profitability and earnings.

With us today are Mark Smucker, CEO, President and Chair of the Board; Tucker Marshall, CFO, Executive Vice President, Frozen Handheld and Spreads and Sweet Baked Snacks; and Crystal Beiting, VP, Investor Relations and FP&A. Thanks for being here, and over to you, Mark.

Andrew, Elder Statesman, thank you. Always a pleasure to be here. Thank you to everyone for coming. And really pleased to talk about The J.M. Smucker Company and how we continue to advance our strategy.

And as always, please note that certain information provided today is forward-looking based on current views and assumptions. Also, we use non-GAAP results for the purpose of evaluating performance internally. Details for both items can be found in the slides for today's presentation available on our Investor Relations website.

Joining me today is Tucker Marshall, Chief Financial Officer, Executive Vice President, Frozen Handheld & Spreads and Sweet Baked Snacks, who will follow my remarks with an overview of our financial strategy and priorities.

I will begin with the changes to the leadership structure that we announced last week. These changes are designed to support the continued execution of our long-term growth strategy. Further, the momentum of our portfolio of leading brands, and enhance profitability and earnings. In particular, we have aligned our business segments under Tucker and Rob Ferguson, two proven leaders with extensive strategic, financial and operational experience, who will advance these objectives. I have complete confidence in them as they step into their expanded roles.

The theme of our presentation is to build on these objectives and make 3 distinct elements clear. First, we have a clear strategy to drive growth and achieve our long-term financial algorithm. Over the past several years, we have fundamentally transformed the company. We have a strong portfolio of brands that participate in attractive categories and play key roles in the life of the consumer.

Second, we are highly focused on driving improved profitability and earnings growth across the company. We anticipate significant margin expansion in the near term and have identified long-term opportunities across the company through our transformation office.

And third, we remain committed to a disciplined capital deployment model with a focus on organic growth opportunities, debt paydown and shareholder return in the form of dividends and share repurchases, while maintaining our current investment-grade debt rating.

Throughout our history, we have continued to evolve the company while maintaining what has always made us unique. Today, we are a leader in the consumer goods space with over $9 billion in anticipated net sales this fiscal year with a portfolio primarily focused on North America. Our portfolio includes leading and iconic brands alongside higher growth brands that enhance our momentum, enabling consistent and balanced growth across the portfolio.

Over 95% of our U.S. retail channel comes from categories where we hold either the #1 or #2 branded position, underscoring the strength of our portfolio. We participate in the highly attractive categories of coffee, snacking and pets. We have transformed our portfolio through a focused strategy centered around engaging and delighting consumers, by participating in attractive categories, building brands consumers love, and being everywhere consumers shop. This approach has created a complementary and cohesive portfolio across the company, supported by our enterprise-wide marketing capabilities, disciplined commercial execution, and an integrated manufacturing and supply chain network.

Our strategy is working, and we are delivering top line growth and increasing market share. We anticipate delivering strong comparable net sales growth this fiscal year, our seventh consecutive year of top line growth when excluding contract manufacturing sales related to the divested pet food brands. Nearly 2/3 of our portfolio is growing or maintaining dollar share. While over 3/4 of the portfolio is growing or maintaining volume share in measured retail channels, and we have renewed our focus on innovation and anticipate approximately $300 million in net sales this fiscal year from new products launched this year and last, an increase of approximately 35% versus the same time frame in the prior year.

In addition to the strong top line performance, we are focused on improving profitability and earnings growth across the company. The recent leadership changes further support these efforts, including the creation of the Chief Product Supply Officer role and the updated alignment of our business segments under the strategic leadership of Tucker and Rob.

In the near term, we see opportunities to expand margins for both U.S. Retail Coffee and Sweet Baked Snacks. In coffee, we will not fully recover green coffee tariff costs incurred in fiscal year 2026. However, given the recent changes to U.S. trade policy to exclude tariffs on green coffee, we will lap these costs next fiscal year. Additionally, we are now starting to see moderation in green coffee futures supported by positive signs for next year's crop. Given the pass-through nature of the coffee category during a period of sustained deflation, we have historically lowered prices and total profit has benefited from the favorable impact.

In Sweet Baked Snacks, we will continue to make progress towards improving profitability. We have now completed the closure of the Indianapolis manufacturing facility which will deliver approximately $10 million in cost savings this fiscal year and $30 million annually. Long term, our transformation office will continue to deliver savings across the company that will contribute to achieving our operating income growth expectations when building upon top line growth.

The transformation office is driving ownership and accountability for the execution of cost and productivity initiatives. We view transformation activities as a permanent part of our operating model and have established a road map of initiatives that will deliver ongoing benefits to the business.

Driven by our transformed portfolio and margin expansion opportunities, we expect to generate over $1 billion in free cash flow annually over the long term. With this improved cash generation, we are committed to a disciplined capital deployment model, prioritizing organic growth opportunities, debt pay down and shareholder return in the form of dividends and share repurchases. While we have historically evaluated growth opportunities through acquisitions, this is not an active strategic focus today. Instead, our attention is firmly on driving sustainable organic growth.

Let me now share several examples of how we are advancing our growth strategy and positioning each of our businesses for long-term success. Starting with the Coffee segment, where our portfolio continues to exceed our expectations. Coffee is a strong and resilient category because it is more than just a beverage. It is a ritual for our consumers who genuinely love it, 3 out of 4 adult Americans drink coffee, and it is not something that they are willing to go without.

At-home coffee represents approximately 70% of all coffee drinking occasions, and our portfolio provides an affordable price per serving as an alternative to other beverage experiences such as the coffee shop among others. This benefits us as the leader in at-home coffee with a portfolio that features 3 of the top 8 brands in the category, Folgers, Dunkin' and Cafe Bustelo.

Within our portfolio, we continue to see growth and profit opportunities for the iconic Folgers and Dunkin' brands though our largest opportunity is the Cafe Bustelo brand. Cafe Bustelo continues to be one of the fastest-growing brands in the at-home coffee category. This fiscal year, we expect the brand to surpass $500 million in net sales, an increase of more than $100 million versus the prior year, driven by both volume and pricing. This strong growth is the result of a strategy centered around expanding the brand's broad national appeal through distribution gains, our distinctive and unique Esta Aqui marketing campaign and delivering innovation that meets the needs of the consumer.

The Cafe Bustelo brand is outpacing the category across all generations and ethnicities, which reflects our strategy of becoming more accessible and expanding our consumer base. Most notably, the Cafe Bustelo brand is experiencing strong growth among Gen Z and millennials. Our innovation strategy is further fueling this momentum.

Last summer, we introduced new roast profiles to expand the brand from its traditional espresso brew to blends that can be brewed more easily in traditional drip brewers, appealing to younger, more diverse buyers while remaining inspired by its Latin routes.

We are also expanding into convenient cold coffee formats to drive incremental consumption occasions. Last fall, we launched Cafe Bustelo ready-to-drink single-serve beverages which we have available at our coffee bar this week outside. Early results have been positive, and we are expanding distribution to select retailers with further distribution plans already in place.

Looking forward, we have strong ambitions for the Cafe Bustelo brand to become a top 4 brand in the at-home coffee category, and the brand is well on its way to achieving this goal.

Now shifting to the iconic Folgers and Dunkin' brands. For the Folgers brand, we have evolved our media strategy in recent years to over-index with younger consumers, driving relevance and growth through premium varieties such as Folgers Black Silk which offers a darker, smoother experience. Our actions are resonating with consumers. Folgers continues to be the #1 brand in total volume share and the #1 brand in total buyers among younger generations in the at-home coffee category.

Building on this momentum, we are launching a new national media campaign that reimagines our jingle in a way that resonates deeply with audiences of all ages, but especially with younger coffee drinkers. Let's take a look.

[Presentation]

The best part of waking up continues to be defined by the Folgers brand, and we are excited to share our story with the next generation of coffee drinkers.

For the Dunkin' brand, we introduced a new campaign, Iconic Home, which resonates strongly with consumers through its unique approach that reminds them that Dunkin' at home is for everyone, every moment and every mood.

Alongside this campaign, we are launching new packaging and are expanding the portfolio to meet the growing consumer demand for bolder roasts. While the Dunkin' brand's lineup has historically leaned towards light and medium roast, we are now introducing medium dark and dark roast offerings. We are launching Dunkin' Twilight and Dunkin' Bold Blend, 2 new roasts that delivered the bold cup of coffee that consumers are increasingly seeking. These offerings will begin shipping this spring.

Next, our Frozen Handheld & Spreads business where we have transformed the portfolio to focus on our largest growth opportunity, the Uncrustables brand. And our leading spreads portfolio with Jif Peanut Butter and Smucker's Fruit Spreads. The Uncrustables brand has grown at an impressive 20% CAGR over the past 10 fiscal years, and we continue to see a strong runway for growth ahead. This fiscal year, we expect to achieve our $1 billion annual net sales aspiration for the Uncrustables brand. The Uncrustables brand is the leader in the frozen snacks and sandwiches category and the brand is growing households with key demographics, including age, ethnicity and income cohort.

Notably, the brand continues to over-index to households with kids and millennials. We are creating a truly iconic brand with widespread multigenerational appeal, which will soon be a top 3 brand in the total frozen department.

The most exciting part, we're not done innovating yet. Take a look.

[Presentation]

Consumers wanted to be able to enjoy their Uncrustables sandwiches right away without waiting for thought time, and we are innovating to meet their needs. Now in addition to being kept in the freezer, all Uncrustables sandwiches will also be able to be kept fresh in the fridge for up to 5 days, making it easier to enjoy at a moment's notice. Consumer insights are promising. 50% of nonusers said they are more likely to try Uncrustables sandwiches now and 72% of current users said they expect to buy more of them. Our new fridge friendly Uncrustables sandwiches will be available across all flavors starting this summer.

Our innovation is also expanding beyond the lunch box to a new morning occasion through our new offerings of Uncrustables sandwiches with 12 grams of protein, Up & Apple and Bright-Eyed Berry. These new varieties access an entirely new day part for the Uncrustables brand focused on breakfast and morning snacking, while also meeting the needs of consumers who are increasingly prioritizing protein throughout the day.

Morning protein Uncrustables sandwiches are off to a strong start. Take a look at some of our newest fans.

[Presentation]

Given the momentum, we plan to further expand the morning protein Uncrustables sandwiches platform this spring with a new blueberry flavor. As we look to expand availability, the convenience channel offers a unique opportunity for an immediate consumption occasion. Though relatively new, we have tripled monthly sales for the Uncrustables brand in this channel versus the prior year. Uncrustable sandwiches are in the top 10% of fastest-growing brands in dollars and units across all categories in the convenience channel, and we expect to double the number of convenience stores we are already in over time.

With the success of grape and strawberry varieties over the last year, many of our current retailers are looking to add additional variety. These actions support our broader strategy to make Uncrustable Sandwiches available everywhere and for every occasion.

Now turning to our category-leading peanut butter and fruit spreads portfolio where we remain well positioned in resilient categories that perform across economic environments. Our spreads business is in approximately 65 million households, and our brands hold the #1 share positions in these categories. Jif Peanut Butter and Smucker's fruit spreads continue to be meaningful cash generators for the company. As we look ahead, we remain focused on driving profitability while modernizing our spreads business through new innovation and go-to-market approaches to support sustained growth.

For the Jif brand, we are launching a new line specifically designed to meet the evolving health preferences of today's consumers. Jif Simply offers the strong brand equity of Jif Peanut Butter in a limited ingredient, simple recipe with a taste consumers love. The new Jif Simply line has already received strong retailer acceptance and is in stores now.

For Smucker's Fruit Spreads, we are modernizing the iconic products with new fresh label redesign intentionally connecting our fruit spreads to our full portfolio of Smucker's branded products, including Uncrustables. We are excited to introduce the first redesign in nearly 30 years in the spring of this year. We see a clear opportunity to modernize our spreads portfolio and to elevate everyday meal and snack occasions.

In fiscal year 2027, we will launch new marketing for the Jif and Smucker's brands focused on modern eating moments, spotlighting how consumers use our spreads beyond their traditional PB&J to drive growth through new usage occasions.

For our Pet segment, we have leading brands in Milk-Bone dog snacks and Meow Mix cat food. Both segments remain highly attractive, supported by favorable category tailwinds, including pet population trends, where we expect to see both dog and cat population growth over the long term. The continued humanization of pets, leading pet parents to treat their pets like members of the family driving further premiumization opportunities and e-commerce trends, a channel that continues to see strong growth and aligns with evolving consumer preferences, which benefits our portfolio. We will continue to build on these favorable category dynamics by leveraging our proven brand-building model and strong track record of innovation to further accelerate growth.

Starting with the Milk-Bone brand, we are modernizing packaging to better highlight key product benefits. New Milk-Bone biscuit packaging now appearing on shelf features updated communication on protein content and other functional attributes that are increasingly important purchase drivers. We are applying the same approach to Milk-Bone Brushing Chews, refreshing graphics to bring their functional dental benefits forward while maintaining a familiar design that supports strong brand recognition. These enhancements are intended to reinforce the brand's leadership in the category by strengthening our core consumer value proposition and driving stronger product differentiation.

Turning to innovation. We are increasing our premium offerings through our Milk-Bone Peanut Buttery Bites platform, which was the #1 dog snacks launch over the last 4 years. Consumers love this unique collaboration between the #1 brand in dog snacks and the #1 branded peanut butter, and we are excited to announce the expansion of this platform with a new treat made with real Jif peanut butter, take a look.

[Presentation]

Milk-Bone Peanut Buttery Cups will expand the platform and launch next month.

Finally, in dog snacks, the e-commerce channel continues to deliver strong growth and now represents 1/3 of the total dog snacks category. The Milk-Bone brand is performing exceptionally well in this critical channel, growing 14% over the last 13-week period, while outpacing the overall category. To build on this momentum, we are enhancing and optimizing our digital content to improve searchability and are launching more e-commerce-friendly value sizes across the Milk-Bone brand.

Shifting to cat food, the Meow Mix brand continues to have strong momentum, and we still have significant runway to grow this iconic brand. Even as a leading brand in the category, the brand only has an 8% dollar share, underscoring the significant growth potential in this attractive category.

In dry cat food, the Meow Mix brand is the leader in dollar and volume share and household penetration. Last year, we modernized our core offerings to maximize growth with new households and offer cat parents mainstream options. We enhanced our formulas and refreshed packaging to showcase taste and health benefits in a more modern design now in market. These changes are resonating with consumers as sales growth for the Meow Mix brand continues to outpace the category. Consumer-led innovation has also played a pivotal role in this growth.

Meow Mix Gravy Bursts combines the convenience of dry food with the excitement and taste of wet food. The offering continues to exceed expectations and was the #1 dry innovation launch in the category in 2025. Building on this success, we are expanding the platform with Gravy Bursts salmon flavor and Gravy Bursts flavored chicken treats, which are now in stores.

Beyond dry cat food, we remain excited about our long-term opportunity to grow across the wet cat food and cat treats categories. We are significantly underdeveloped in this roughly $11 billion and growing space, and we continue to evaluate opportunities to leverage the unique equity of the Meow Mix brand and our deep understanding of consumer behavior to meaningfully expand our presence.

Finally, our Sweet Baked Snacks segment, where we have a leading position in the sweet baked goods category. The path to stabilization is taking longer than we expected but our focus remains on positioning the Hostess brand for eventual growth through disciplined execution of 3 priorities: strengthening the portfolio, elevating our execution, and reigniting sustainable growth.

Let me walk through the near-term actions we're taking. We are reducing our SKU count by 25% to simplify our offering as we prioritize high velocity and margin-accretive SKUs. The majority of this work is now complete, and we anticipate the benefits from operational efficiency and improved customer service to largely benefit next fiscal year. Additionally, we have closed our Indianapolis manufacturing facility, which will deliver approximately $10 million in cost savings this fiscal year and $30 million annually.

Finally, we have made the strategic decision to reduce promotional activity from January to the end of the fiscal year for Sweet Baked Snacks segment. As we work to improve our operations and evaluate where the greatest return on investment will be for the brand going forward. While these actions will strengthen the segment, and support long-term growth and margin expansion, they are creating near-term volatility in volume and profitability this fiscal year that is greater than originally contemplated. As these actions progress, we expect performance to improve over time.

At the same time, we continue to position the brand for sustained growth through our culturally relevant marketing and by bringing consumer-led innovation to market across our portfolio icons, including Donettes, Cupcakes and Twinkies.

Within Hostess Donettes, which now represents approximately 40% of the segment sales, we are driving brand excitement through new flavors and formats, including the recent launch of Donettes Churro mini donuts. Churro inspired varieties are gaining broad consumer appeal and are a natural extension of the brand's equity. Next month, we will introduce a new frosted sharing size, building on the strong performance of our -- building on the strong performance of our existing sharing format. These offerings over-indexed to younger sweet snackers relative to the brand and demonstrate faster purchase cycles than multipack, reinforcing the expandable consumption opportunity.

Hostess Donettes continue to outperform the broader Sweet Baked goods category as the brand benefits from the growing A.M. occasion and evolving consumer preferences around convenience and portability. We expect this momentum to continue as the convenience channel stabilizes, an important driver of A.M. occasions and where the Hostess brand holds a leading share.

In Hostess Cupcakes, we recently launched a mini variety designed to meet consumer demand for bite-sized portions and permissible indulgence. They continue to be highly incremental to the brand, and we are supporting Hostess Cupcakes minis with dedicated media assets.

Finally, limited time offerings remain key across the portfolio as we continue to infuse the brand into today's culture. One great example is our recent partnership with the movie Wicked: For Good where we launched limited-edition cupcakes and leveraged a multi-outlet marketing approach to engage consumers. Holidays also continue to drive incremental occasion for the brand, and we have a strong Valentine's Day lineup across our portfolio.

Looking ahead, progress on our strategy continues to take time. We remain focused on disciplined execution across the portfolio and improved profitability as we work to stabilize performance for the Sweet Baked Snacks segment.

In closing, we are uniquely positioned in attractive categories with a portfolio that spans leading iconic brands as well as higher growth brands. We are highly focused on driving profitability and earnings growth across the company and generating free cash flow. I am confident we have the right strategy and the right leaders in place to create value for our shareholders.

With that, I'll turn it over to Tucker.

Thank you, Mark, and good afternoon, everyone. It's great to be with you at this year's CAGNY conference. As Mark outlined, the company is entering its next chapter of growth where they transform portfolio, clear strategy and strong momentum across the business. Our focus is on ensuring that this momentum translates into sustainable earnings growth, strong cash generation and disciplined capital allocation that creates long-term value for our shareholders.

We are pleased with the performance of our portfolio through the first half of our fiscal year, particularly given the dynamic and evolving external environment. Next Thursday, we look forward to providing an update on our third quarter financial results, along with our full year outlook, which we expect to maintain. Our earnings momentum this fiscal year is setting us up for an algorithm year or potentially better in fiscal year 2027, absent any significant changes.

We continue to focus on driving the company's growth strategy while maintaining financial discipline across the organization.

This focus is anchored by our financial priorities, which are the following: active and transparent communication, clear and consistent communication with our constituents remains the cornerstone of our approach.

Consistent execution toward credible financial targets. We are committed to delivering against our long-term financial algorithm with both accountability and transparency.

A focus on productivity and cost initiatives. Our transformation office is central to these efforts, driving ongoing cost savings that expand margin and fund investments in our brands and capabilities.

Prioritization of the highest and best return on investment opportunities. We are allocating resources to the areas of our portfolio where we have a right to win and the greatest opportunity to create long-term value.

And finally, a balanced capital deployment model. We remain disciplined in how we deploy cash, balancing reinvestment in the business, debt reduction and a return to shareholders through dividends and share repurchases.

Together, these priorities are the building blocks that position us to deliver against net sales and earnings growth while enhancing margins. Our strategy and priorities give us confidence in the ability to achieve our long-term financial algorithm, which is comprised of the following: low single-digit net sales growth; mid-single-digit operating income growth; high single-digit adjusted earnings per share growth; and total shareholder return of approximately 10% or greater when considering our dividend policy.

We see these objectives as steady, compelling and compounding, including a commitment to a disciplined capital deployment model. Beyond our long-term financial algorithm, we remain committed to our goal of generating over $1 billion in free cash flow annually.

Let us review each of our capital deployment priorities. First is fueling organic growth of our business. While we have historically evaluated growth opportunities through acquisitions, this is no longer an active strategic focus. Instead, our attention is firmly on driving sustainable organic growth and prioritizing resources toward the best opportunities in our current portfolio.

Next, we are committed to debt reduction with a plan to pay down debt approximately $500 million of debt annually this fiscal year and next. We expect this debt reduction in overall business growth. We anticipate a leverage ratio at or below 3x net debt to EBITDA by the end of our fiscal year 2027. This level of leverage provides financial flexibility for a balanced approach to capital deployment and the opportunity to consider share repurchases.

Another key component of our capital deployment model is our dividend. We remain committed to our dividend, which has increased at a 6% compounded annual growth rate over the past 10 fiscal years. In July, we announced that we increased the dividend for the 24th consecutive fiscal year. We expect our Board to maintain the company's current dividend policy, which is to return approximately 40% to 45% of our annual adjusted earnings per share to shareholders, reflecting dividend growth consistent with future earnings.

This capital deployment model enables us to reinvest in the business and fund our largest growth opportunities while delivering sustainable returns for shareholders. We believe a total shareholder return of approximately 10% or greater is achievable over the long term when considering our next chapter of growth and margin outlook.

There are significant opportunities for the company ahead. And we will continue to take the necessary actions that strengthen our future growth prospects while making progress against our commitment to margin expansion and earnings growth. Our strategy and execution will enable the company to deliver shareholder value as we move forward.

In closing, I would like to express my sincere appreciation for our employees, their commitment to executing with excellence and their passion for our company, positions us for continued success. Thank you for your time today.

Thank you for attending our presentation. We're going to transition to the breakout room for those interested in additional Q&A. Thank you.

Good morning, and welcome to The J.M. Smucker Company's Fiscal 2026 Second Quarter Earnings Question-and-Answer session. This conference call is being recorded. [Operator Instructions]

I will now turn the call over to Crystal Beiting, Vice President, Investor Relations and Financial Planning and Analysis. Thank you. You may begin.

Good morning, and thank you for joining our fiscal 2026 second quarter earnings question-and-answer session. I hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website at jmsmucker.com. We will also post an audio replay of this call at the conclusion of this morning's Q&A session.

During today's call, we may make forward-looking statements that reflect our current expectations about plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, we use non-GAAP results to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning's press release.

Participating on this call are Mark Smucker, Chief Executive Officer and Chair of the Board; and Tucker Marshall, Chief Financial Officer. We will now open the call for questions. Operator, please queue up the first question.

[Operator Instructions] Our first question today is coming from Andrew Lazar from Barclays.

Maybe I wanted to start off with a question on Sweet Baked Goods, if I could, organic sales in that segment came in certainly better than I think most street expectations. Trying to get a sense from you is how much of this do you see as sort of sustainable improvement versus maybe just easier year-ago compares or any transitory benefits?

Andrew, it's Mark, thanks for the question. First, we are very pleased with the progress that we're making on Sweet Baked Snacks and the Hostess brand. As you noted, we are seeing sequential improvement. Notably, we're seeing improved performance in C-store. Our volume shares are improving, we've had our focus on a more focused portfolio has been helping. You'll recall that we had a 3-pronged plan where we're strengthening our portfolio by actually eliminating 25% of the SKUs, and we've seen really strong flow back into our core brands, notably the #1 brand of donuts, donuts and cupcakes, which each of those are the #1 in their respective segments. And so that has been great we recently relaunched Suzy Q's after they've been out of the market for many years, and that has been off to a pretty good start.

And then just elevating our execution around sales. We're streamlining our operations. The Indianapolis closure should be complete by the fourth quarter and then continuing to invest in the brand. So long and short of it is, the plan we put in place, decisive actions are working and we just need to continue to do what we're doing over subsequent quarters. And we do expect to see acceleration over the next couple of quarters as well.

Got it. And then maybe, Tucker, how much of the $0.50 tariff impact this year is specifically coffee-related such that if tariff policy remains sort of unchanged from here going forward, how much of a benefit we could or should expect this to be to fiscal '27?

Andrew, the predominance of the $0.50, if not all, is related to green coffee tariffs. And so therefore, stepping into FY '27, it should be viewed as a tailwind, while in FY '26, it continues to be a headwind.

Our next question today is coming from Tom Palmer from JPMorgan.

I wanted to follow-up on coffee as well. You noted not taking the third round of pricing as an incremental earnings overhang in the prepared remarks for this year. You've provided some really helpful bridges in terms of other items, such as the tariff impact. I was wondering if you could maybe quantify how much that might have impacted your outlook, the decision not to take pricing? And then just given the tariff guidance was kind of unchanged, should we think about tariffs flow through your P&L throughout fiscal '26? Or is there a point where we start to see release this year?

As you think about this fiscal year as we came out of our first quarter earnings call, we called out a net $0.50 impact as a result of tariffs. And that net $0.50 impact was receiving the benefit of recovering dollar-for-dollar cost inflation due to tariffs through an early winter pricing action and then ultimately making an assumption around price elasticity of demand factor. That was all embedded in the $0.50 as we came out of the first quarter earnings call. We have essentially added that back as a result of being in a tariff off environment moving forward. However, we have made the decision not to take pricing through U.S. Retail Coffee and early winter. So we will be absorbing about $75 million of tariff-related costs incurred to date that we will realize, as I've noted in our third quarter, which coincidentally is $0.50, which is why we're calling it out. Therefore, an impact to this fiscal year, but a tailwind to next fiscal year.

Understood. On the SD&A side, there was the guidance reduction now flat year-over-year, couple of pieces. One, is there a segment where that's going to be most evident? And then any update on marketing plans? Maybe I missed it. I think they were previously expected to be up around $40 million year-over-year. Any change there?

So Tom, let's begin with marketing. We remain committed to investing in the long-term health of our brands. And so marketing absolute dollars will be up year-over-year. And we're projecting that to be about 5.5% of net sales, which is pretty consistent throughout the year. We have sharpened the pencil as it relates to SG&A spend not only throughout the entire network, but also as we think about discretionary spend. And we've also sharpened the pencil in certain areas as it relates to marketing, but we're still committed behind our growth brands, and you will see an increase year-over-year.

Next question is coming from Robert Moskow from TD Cowen.

I wanted to know Tucker about the profit results in Sweet Baked Snacks. Was that also in line with your expectations? Because sequentially, it's a step down. And generally, when you have these SKU rationalizations, it improves the profitability of the business because you get rid of some waste. Is there a reason why that's not happening in 2Q?

Rob, so the second quarter top line for Sweet Baked Snacks did exceed our expectations. The bottom line did not meet our expectations. We had anticipated sort of in line with Q1 to maybe slightly better in our second quarter. And as you've noted, we were just over $20 million. We do expect both the third and fourth quarters to get better so that we get back toward our outlook for the full fiscal year with respect to segment profit.

And I would say that the second quarter shortfall to expectations really had much to do with the transition of our bakery network or environment and just more costs that we absorbed through our supply chain, whether that be absorption, overhead, just the timing of transition. So we do expect benefit as we step into the third and fourth quarters. And I would also remind you, in our fourth quarter, we should benefit about $10 million from the closure of the Indianapolis facility, which is estimated to be a $30 million annual run rate impact, of which $10 million effects or benefits our fourth quarter this fiscal year.

Okay. And maybe a follow-up on pet treats. In the commentary, you described the category. Dog treats is getting better. Your business is still down. What should we expect in the back half? I know there's some very easy -- I think some easy comparisons to some disruption last year. But are there marketing plans also to improve market share, and what, I guess, is an improving category overall?

Rob, it's Mark. And you actually are correct. You stated it, we are expecting a really strong lap, particularly as we get into this third quarter. And so you will see Milk-Bone getting back to growth. which is great news. And it's not only the lab, but I would just highlight, it's all the work that we've been doing, and it is marketing. We have continued to push on our campaign, which is called More Dog. And so you've probably seen that in various media channels. That's been helping just the -- again, what we always remind you guys is just the spectrum from value-based biscuits, all the way to premiumization. As the consumers are looking for different things from their dog treats. The Milk-Bone brand is definitely there delivering. And then just the innovation on peanut buttery bites has been very successful.

And as we referenced in the prepared remarks, we are going to be launching another innovation after the beginning of the calendar year, which is also standing on another collaboration between the Jif brand and the Milk-Bone brand. So that, including seasonal items, which we referenced as well. There's a lot of really strong innovation and that category depends a lot on news for growth. So feeling really good about Milk-Bone and the trajectory of the brand. And then just overall, our pet business and the growth that's going to be driven by Meow Mix, we expect to continue as well.

Rob, in support of your question, we are anticipating low single-digit growth for our pet portfolio in the third and fourth quarters behind the momentum of Milk-Bone and Meow Mix.

Next question is coming from [ Yasmin Daswani ] from Bank of America.

Just on the reduced net sales expectation for frozen handheld and spreads. I know that spreads, particularly peanut butter was challenged in the second quarter, and the expectation is for that to continue for the balance of the year. So I'm asking around the reduced net sales expectation, is that simply flowing through the weaker 2Q? Or is that also spreads being enough of an offset that Uncrustables accelerating to double-digit growth won't be enough to offset the unforeseen weakness?

Yas, as it relates to frozen handheld and spreads, we're really calling down that business, a little over $80 million on a full year basis. You're kind of seeing half of that come through the second quarter and the balance will come through the back half of the year. Much of that is driven by the spreads portfolio. And we really haven't taken up the outlook on the Uncrustables brand, but I can tell you that it still demonstrates growth and it is demonstrating a path or trajectory to being a $1 billion brand by the end of this fiscal year.

Yas, if I may just add a little bit of color on a couple of these items. So Uncrustables, Tucker just highlighted, still going to be a $1 billion brand, the reason, overall, we saw 7% for the total company. Away From Home has been extremely strong. We did see growth in retail as well maybe not as much as we would have expected because we were lapping a very strong Q2 last year with really strong merchandising and promo. But we do expect Uncrustables to get back to double-digit growth in the back half of the year, obviously, supporting that $1 billion ambition and innovation is playing a key role, right? So where a couple of years ago, when we had been capacity constrained, we weren't able to innovate now. We're launching seasonal flavors. The new 1 that just came out is this peanut butter and chocolate is called [ PB Choco Craze ]. And then we've got 2 new higher protein items that are meant to target sort of a morning daypart or breakfast daypart and the uptake on those from our retail customers has been great as well.

And then just on spreads, because we were expecting the question, I might just highlight peanut butter. Again, there is a very big lap against -- last Q2, we had multiple tropical storms in the Caribbean, and that drove a lot of stock up. And so we are seeing the Jif, the peanut butter business being down in the quarter, but regardless, it's generally holding share. So overall, still feel good about spreads, making sure that we're getting our execution right, but that is obviously supportive of the Uncrustables business.

Okay. Great. And if I could just squeeze another one in. I think the previous expectation was for -- in Sweet Baked Snacks for SKU rationalization to be isolated to the second quarter. And with now that extending into the third quarter, is the expectation still for top line stabilization in the second half? And I guess asked another way, given the expectation for sequential improvement, could 3Q be flattish in 4Q growth? Or is there still a possibility for 3Q to be down?

I would say that SKU rationalization [indiscernible] slightly flat in the second quarter or third quarter or actually a comparable basis. And then you should see a growth

[Technical Difficulty]

You're microphone is off.

Sorry. Yes, I'm sorry, we had a technical difficulty here. But to your question, I just want to acknowledge that the Q3 will be the completion of the SKU rationalization associated with the closure of the Indianapolis bakery. And then with respect to your question on growth, we should be flat to slightly down in the third quarter on a comparable basis and then demonstrating a level of growth on a low single-digit basis in our fourth quarter for Sweet Baked Snacks.

[Operator Instructions] Our next question is coming from Megan Clapp from Morgan Stanley.

Maybe another question, Tucker, on coffee. Can you talk a little bit about how you're thinking about the pacing of coffee margins in 3Q and 4Q, the 3Q EPS outlook in the prepared remarks, a little bit softer than where the Street is. I assume most of that is just that you still have tariff coffee flowing through the P&L that's sitting on the balance sheet today without the pricing. So is that the right way to think about it? And then -- do you still expect to get to mid-20% margins in coffee and 4Q? Or will there be a lingering kind of tariff impact there as well?

Megan, so we demonstrated an 18.2% second quarter segment profit margin in Coffee, we would anticipate a slight improvement to that in our third quarter, but it will not surpass 20%. And then as you step into our fourth quarter, we should move beyond 20%. I don't think that we'll get all the way to 25%, just as we continue to digest a lot of cost and cost inflation, but just acknowledging not taking pricing in early winter in our U.S. Retail Coffee portfolio and absorbing the incurred coffee tariffs to date. So that will be approximately $75 million in our third quarter, some of that may go into our fourth quarter, but the predominance is in the third to your question.

Okay. That's helpful. And then maybe just putting together all of your comments on pet and Sweet Baked Snacks and further handhelds. As you think about moving to the third quarter and the fourth quarter, you laid out for all segments, an expectation for an acceleration in growth. So as you think about the 4Q exit rate, I guess, how are you feeling about outside of coffee, kind of the rest of the U.S. retail portfolio contributing to -- or getting back to [ Algo-OSG ] as we finish the year?

Megan, I would say that when you think of the midpoint of our guidance range today at the top line, it's 4% on a reported basis. And then you affect or isolate on a comparable basis, divestitures and foreign exchange, and it's aligning to about 5.5% comparable growth year-over-year. And then underpinning that, we've got about $38 million worth of co-manufacturing sales that we're lapping. So all else equal, we're at 6% on a comparable basis adjusted for the co-manufacturing sales for our outlook for this year. And yes, much of that is driven by our coffee portfolio, but when you think about the balance of our portfolio, we're seeing tremendous momentum in the Away From Home aspect. We're seeing resilience and strength in our pet portfolio. We're seeing stabilization in Sweet Baked Snacks. We obviously see great growth and momentum on Uncrustables, and we're addressing things within our spreads portfolio.

And so I don't want to promise sort of what the exit rate is, what we're acknowledging is that we do have great organic sales growth on a comparable basis, our strategy is working, our execution is focused and we'll continue to drive the growth brands, and we'll continue to support the balance of the portfolio.

Next question today is coming from Peter Grom from UBS.

I wanted to just ask a follow-up on the tariff commentary in '27. And I know you noted to both Tom that this will be a tailwind to earnings. But I guess specifically, are you expecting those benefits to largely drop to the bottom line? Or would you look to maybe reinvest some of that upside?

As it relates to tariff-based inflation and in a tariff off environment and not taking pricing for tariffs and in turn, not experiencing tariffs in our next fiscal year that should benefit our bottom line, which is why we're effectively saying it should be a tailwind to our coffee portfolio next fiscal year. So hopefully, it helps provide a little bit of context about how we're thinking about tariffs stepping into next year.

Okay. No, that's helpful. And then maybe just on Coffee. Can you maybe walk us through what you're now expecting in terms of elasticity -- and I guess just as we think about modeling top line growth through the balance of the year, can you maybe just understand how you see price versus volume at this stage, especially considering that you're not going to take that additional price increase for the winter?

Sure. So our current outlook for the Coffee portfolio is 16% year-over-year growth. And what's embedded in that is 22% pricing offset by 6% down volume mix. That's an improvement to when we stepped into this fiscal year where we thought growth would be 11% against 22% pricing offset by negative 11% of volume mix. And so what you can see is our elasticity assumptions have improved from 0.5 stepping into this fiscal year to around 0.3 where we stand. And again, that's on average over the year. So hopefully, that provides additional context as to the strength and resilience of our Coffee portfolio.

Our next question is coming from Matt Smith from Stifel.

I wanted to dig in a bit on the Uncrustables sequential acceleration in the second half. Can you talk about some of the underpinnings to that acceleration, whether there's also unique comparisons there? And how we should be considering pricing in frozen handheld and spreads in the second half? Is there potentially increased promotional support behind Uncrustables to support that sequential acceleration?

Yes. So we demonstrated 7% growth in our second quarter, which is really good momentum as we continue to advance to the $1 billion ambition. As we think about our third and fourth quarters, we would anticipate low double-digit growth on the way to that journey of being a $1 billion brand by the end of this year. We will continue to ensure that we're supporting with marketing. We continue to support our recent innovation launch around protein. We continue to round out distribution and also making sure that we have the right placement and promotion.

I would also acknowledge that about 80% of sales run through our U.S. retail portfolio and the balance of 20% flow through our Away From Home portfolio, and we are seeing great momentum in Away From Home on Uncrustables. And 1 example is the acceleration of growth in the convenience channel not only due to our innovation behind the sandwich, but also due to the capabilities that we acquired through the Hostess acquisition.

And Mark, as a follow-up to some of the coffee commentary, elasticities are better than expected on average. But the performance by brand in the measured channel data that we see has varied for -- specifically for the Dunkin' brand, elasticities have been softer than Folgers or Bustelo, was that expected as you went into a more price-intensive environment? Has the performance of Dunkin' been different than what you anticipated coming into the year?

Yes, Matt, a couple of things. So First of all, you're right that we have seen obviously very strong performance on Bustelo and Folgers. And so the resilience of the category overall gives us optimism, right, in terms of just how we -- consumer is still consuming coffee. Our brands are resonating with consumers. The investments we're making behind these brands is working notably Bustelo just had a phenomenal quarter. And then Dunkin' did grow in the quarter. So we did see a bit of improvement in Dunkin'.

But as we've highlighted in previous quarters, we've seen some competitive pricing pressure that we have not overcome, but we are continuing to actually make surgical balancing some surgical pricing investments as well as supporting innovation in terms of seasonals and so forth. So I think the long-term story on Dunkin' is that it's a great brand. We love the brand, and we still think it has plenty of runway. But over time, as we would expect pricing to moderate competitively, that will support the brand overall.

Our next question is coming from Max Gumport from BNP Paribas.

With regard to Uncrustables and the volume decline that we saw this quarter in the frozen handhelds and spread segment. It sounds like you have plenty of confidence in the business. Distribution is gaming, innovation is working and you still see long-term opportunities. So I'm curious, is the volume decline we saw in the quarter really just due to any lapping items that you saw with the strong 2Q a year ago? And then also, could you comment on anything you're seeing from some of the new entrants in this space who have gotten distribution pretty quickly?

Yes, Max, it's Mark. It is largely the lab. So again, that strong merchandising and promo in the last Q2 last year is what we're lapping. And as you highlighted, both the innovations Tucker in his previous answer, talked a bit about the support that will be not out of the ordinary, but solid merchandising support coming into the back half is going to continue to support the acceleration of that brand. And in broad strokes, we have seen some competition come into the category. I would say that's largely been supportive over the longer term, seeing a couple of other brands, whether that might be private label and some of the variety that you're seeing in the category in terms of -- and then pricing should continue to support the brand. But I think overall, if you just think about the household penetration we've gained and the continued marketing investments, that's -- and the innovation will continue to drive growth.

Great. And then just to wrap it up with regards to the tariff impact, I just want to confirm the $75 million in tariff expense that you're referring to, is that the total amount you expect to see in FY '26 and is essentially entirely due to of coffee tariffs?

Correct.

Our next question is coming from Alexia Howard from Bernstein.

Can I start with innovation and the pace of innovation, are you able to quantify whether that's been accelerating. It sounds as though the pace has been picking up, I'm not sure whether you can give us numbers on percentage of sales from new products? And is that pace of innovation now where you want it to be across the portfolio or are there pockets where you would like to increase that still?

Alexia, thanks. It's Mark. Yes, is the short answer. Our pace of innovation has accelerated I would say I'm very proud both of -- well, actually, across the board, if you look at innovation on Hostess, innovation on pet, notably pet snacks, and more recently, the innovation on Uncrustables has all accelerated. The speed to which our teams have been able to get to market as fast as we've ever done that. And so I think we're very proud of the work we've done. I mean the Uncrustables innovations have been notable. And then I think we expect a little bit of a faster turn out of both pet snacks and human snacks, which we've continued to deliver again. So thank you for the call out.

And then a question for Tucker on leverage. You've been hovering a little above 4x net debt to EBITDA for the last couple of quarters, and you're talking about getting it down to 3x by the end of '27. How quickly does that start coming down? So we expect it to start coming down more substantially in the near term?

Alexia. So we are committed to $975 million of free cash flow generation this fiscal year, which will support $0.5 billion of debt pay down this fiscal year, and we anticipate the ability to pay down an additional $500 million in FY '27. As you think about the leverage profile this year, we'll probably hover around 4x through the balance of fiscal year '26. And then as we step into '27, we should begin to see the step down toward that 3x amount in fiscal year 2027.

Next question is coming from Scott Marks from Jefferies.

The first thing I wanted to ask about, we've heard some of your competitors speak to the need to reduce prices to offer value for the consumer and obviously haven't heard your team talk about that much. So just wondering if you can share any thoughts around that and whether you see any opportunities within the portfolio where you think that might be required?

Scott, thanks. It's Mark. I would say, first and foremost, our portfolio is very broad. And so as we look at each category, our -- the fact that we play across the value spectrum actually allows us to deliver varying degrees of value to the consumer. So if you think about Meow Mix is a mainstream brand that provides affordability or cat parents our Milk-Bone brand, similarly from base biscuits to more premium offerings like the peanut buttery bites also has a range and obviously provides affordability to the consumer it goes without saying in coffee as well, despite the fact that we've seen significant inflation, we're glad, of course, that the tariffs are off, and that affords us the ability to do the right thing for consumers, frankly, and our retail customers and holding our price.

I would say on coffee more broadly, history would show that over time, coffee costs would moderate. And so although we don't have a clear view on to if and when that takes place as we get into a new coffee season, to the extent that we do see some meaningful deflation on the commodity, we would certainly pass that along to consumers as well. So I think, the headline is the portfolio itself offers a tremendous amount of options for consumers and notably value all the way to more premium offerings.

I appreciate that. And the second question for me would be, you've made comments again today just about fiscal '27 in terms of EPS growth expectations on algo were better. Obviously, the tariff relief provides a significant tailwind. So just wondering maybe how we should be thinking about base business expectations for '27 if you're willing to comment on it.

Yes, Scott, it's probably early to provide the FY '27 outlook. But the essence that we are trying to communicate is that with the stabilizing commodity environment, in an off tariff environment as we continue to generate cash and pay down debt and we deliver a level of business momentum there could be a path to that, and that's what we were trying to just lay out as you think about a $9 midpoint at this fiscal year and all of the puts and calls that we've had to deal with in this fiscal year as we consider the future. So hopefully, that provides a little context. Again, as we get to our fourth quarter earnings call, we'll be able to lay out our outlook for FY '27.

Thank you. We reached end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

First of all, I'd just like to thank all of you for joining our call this morning. Our second quarter results demonstrate that our strategy is working. We delivered sequential acceleration in comparable net sales growth, which we anticipate will continue into next quarter. Our bottom line results reflect increased investments in our brands, disciplined cost management and strong execution.

Our business continues to build positive momentum, and we are confident in our ability to deliver our financial outlook for this fiscal year while advancing our long-term objectives to increase shareholder value. As always, I would like to thank our outstanding employees for their continued hard work and dedication to our company. We wish all of you a very happy Thanksgiving and a great holiday week. Have a great day.

Everyone, this concludes our conference call for today. Thank you all for participating, and have a nice day. All parties may now disconnect.

Good morning. This is Crystal Biding, Vice President, Investor Relations and Financial Planning and Analysis for the J.M. Smucker Company. Thank you for listening to our prepared remarks on our fiscal 2026 second quarter earnings call. After this brief introduction, Mark Smucker, Chief Executive Officer and Chair of the Board, will provide a business and strategy update. Tucker Marshall, Chief Financial Officer, will then provide a detailed analysis of the financial results and our updated fiscal 2026 outlook.

Later this morning, we will hold a separate live question and answer webcast. During today's discussion, we will make forward looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, please note, we will refer to non GAAP financial measures, which management uses to evaluate performance internally. I encourage you to read the full disclosure concerning forward looking statements and details on our non GAAP financial measures in this morning's press release.

Today's press release, a supplementary slide deck summarizing the quarterly results, management's prepared remarks and the Q&A webcast can all be accessed on our Investor Relations website at jmsmucker.com. We invite all interested parties to join us at 9:00 a.m. Eastern Time today for a live question and answer session with management to further discuss our second quarter results and outlook for the full 2026 fiscal year. Please contact me if you have any additional questions after today's question and answer session.

I will now turn the discussion over to Mark Smucker.

Thank you, Crystal, and good morning, everyone. We are pleased with our second quarter results and the positive momentum across our business. Strong top line growth was driven by ongoing demand for our leading brands and the continued resilience of our transformed portfolio. Additionally, we delivered sequential acceleration in comparable net sales growth, which we anticipate will continue into the next quarter.

Our bottom line results reflect increased investments in our brands, disciplined cost management and strong execution. While the overall environment remains dynamic, we continue to navigate successfully what we can control and advance our 3 strategic priorities: accelerating organic growth, embedding transformation in our every day and fostering a "Be Bold" mindset.

Consumers continue to seek value and prioritize their spending, which our portfolio is well positioned for as it features offerings across the value spectrum in the attractive categories of coffee, snacking and pet. Within these categories, we are evolving our brands to meet the needs and preferences of today's consumers and prioritizing resources towards our largest opportunities through our key growth platforms, the Uncrustables, Café Bustelo, Milk Bone, Meow Mix and Hostess brands. I'll dive deeper into each of these.

Starting with the Uncrustables brand, which grew net sales 7% at the total company level. We continue to see strong results from our national advertising campaign, distribution gains and innovation. The brand is infusing itself throughout pop culture and social media as demonstrated by the 4 million new households the brand added over the past year alone. These new buyers also over index to millennials and Gen Z households. With only 25% household penetration, the Uncrustables brand still has significant runway to grow.

In the second quarter, we strengthened the Uncrustables brand through consumer led innovation as we leveraged our brand building model to anticipate consumers' needs through a relentless focus on data and insights. As part of this approach, we launched 2 new varieties of Uncrustables Sandwiches with higher protein, Up & Apple and Bright Eyed Berry. These new varieties access an entirely new daypart for the Uncrustables brand focused around breakfast while also meeting the needs of consumers who are increasingly prioritizing protein throughout the day.

We also expanded on our limited edition flavors by launching PB Choco Craze for the fall, following the successful launch of our Berry Burst variety in the summer. This regular cadence of limited edition flavors continues to generate excitement for the brand experience.

From a distribution perspective, we continue to gain traditional freezer space, and we are making strong progress on our expansion into the convenience channel. We have nearly tripled sales for the Uncrustables brand at convenience stores over the past year and are making progress on further distribution opportunities. This new channel not only provides more availability to the consumer for the Uncrustables brand, but also unlocks the benefit of immediate consumption.

We are building a truly iconic brand with widespread multigenerational appeal, which will soon be a top 3 brand in the total freezer aisle. We remain on track for the Uncrustables brand to generate over $1 billion in net sales by the end of this fiscal year.

Our next key growth platform, the Café Bustelo brand is maintaining strong momentum as one of the fastest growing brands in the at home coffee category, thanks to our continued investments and proven brand building strategy. The brand gained dollar and volume share in every segment it competes in, including the mainstream, one cup and instant categories in the latest 13 week period.

The Café Bustelo brand grew net sales by 41% in our U.S. retail coffee portfolio, inclusive of a 9% increase in volume mix. The tremendous growth of the Café Bustelo brand is fueled by distribution expansion and marketing investments through a national marketing campaign.

Earlier this year, we launched new roast profiles in both prepack and one cup formats for the Café Bustelo brand. These new products are off to a strong start and expand the brand from its traditional espresso brew to blends that can be brewed more easily in traditional drip brewers, appealing to younger, more diverse buyers while remaining inspired by its Latin roots.

Through our brand building efforts, we continue to see strong growth in brand awareness and household penetration, both of which have significant runway for continued growth. We anticipate another year of double digit net sales growth for the Café Bustelo brand as we advance our long term strategy and make progress on our ambition for Café Bustelo to become a top 4 brand in the at home coffee category.

Shifting to our key growth drivers in pet, the Milk Bone and Meow Mix brands. For the Milk Bone brand, we delivered sequential improvement in net sales growth versus the prior quarter and anticipate the Milk Bone brand will return to growth in the back half of the fiscal year. Growth will be fueled by our proven strategy to maximize and win everyday treating, amplify the brand love with new pet parents and expand consumption through impulse opportunities across innovation and seasonals.

With the leading brand in the dog snacks category, we are fueling the humanization trend through innovation, premiumization and evolved messaging. We are strengthening our core business value proposition by updating packaging to highlight protein and other functional benefits consumers care about, while increasing our premium offerings with our Milk Bone Peanut Buttery Bites platform. Building on this success, we will be extending the Jif and Milk Bone brands collaboration with innovation launching early next calendar year.

Seasonal innovation also plays a key role in these trends and allows us the opportunity to drive net sales growth through increased dollars per occasion and attract new buyers. Our dog snacks seasonal business is up double digits versus the prior year, and we just launched a new collection of flavors and formats to drive growth during our highest seasonal period of the year, including Milk Bone Dipped Vanilla Sugar Cookie flavored biscuits and Milk Bone Mini's Holiday Biscuit Filled Candy Cane. Our leading seasonal business continues to deliver strong growth, and we expect it to double over the long term.

In cat food, the Meow Mix brand continued its momentum with an increase in net sales and volume mix growth in the quarter. In dry cat food, the Meow Mix brand outpaced the category, growing sales nearly 3x the category rate. Our results were driven by distribution gains, innovation and marketing investments behind our multiyear Meow Mix brand remix campaign.

Outside of dry cat food, we also remain excited for our longer term opportunity to grow our portfolio across the wet cat food and treats categories. We are significantly underdeveloped in this approximately $11 billion growing space and believe the unique equity of the Meow Mix brand and our understanding of consumer behavior gives us significant runway for growth in the future. As a first step, we are extending our Gravy Bursts dry platform to cat treats with Gravy Bursts cat treats shipping now.

For the Hostess brand, we continue to advance our strategy to stabilize and position the brand for long term growth by executing on our 3 priorities of strengthening the portfolio, elevating our execution and reigniting sustainable growth. In the second quarter, we took decisive actions. First, we made progress on reducing our SKU count by 25% to simplify our offerings as we prioritize high velocity and margin accretive SKUs.

Early results are positive with notable flowback into strategically important parts of the business, particularly Hostess Donettes. While total distribution points have declined slightly, the increase in total distribution points for higher turning SKUs is driving positive velocity gains overall. The majority of this work will be completed by the end of our third quarter.

Next, we are on track for the Indianapolis manufacturing facility closure in early calendar year 2026, which will deliver approximately $10 million in cost savings this fiscal year and $30 million annually.

Finally, we are applying our proven brand building model through culturally relevant marketing and refreshed packaging. Our marketing campaign increased unaided awareness and purchase intent double digits for our target market. The campaign has also successfully increased consumer sentiment around both taste and loyalty.

Early signs reinforce that our strategy is working with base velocities improving and volume growing over the last 4 week period. Hostess remains an iconic brand with strong awareness, category leading household penetration and beloved products. We are confident that our strategy and the decisive actions we are taking will stabilize performance and position the brand for sustainable long term growth.

Turning to the dynamics in our U.S. Retail segment. In coffee, net sales increased 21%, driven by increases across all formats and brands. Our portfolio is performing well, and we continue to demonstrate our ability to recover increased commodity costs through responsible pricing.

In the quarter, we continued to lap a price increase from October of the prior fiscal year and due to higher costs and the pass through nature of the coffee category, we took a price increase in both May and August of this year. Since then, price elasticity of demand trends have been favorable to our expectations, demonstrating the strength of our portfolio and the resilience of the at home coffee category.

We continue to navigate a highly inflationary environment with the green coffee commodity and our approach to commodity coverage is to ensure we have a flexible structure that allows us to manage cost fluctuations. Our belief is that the commodity will normalize over time as it has historically.

Finally, given the recent changes to U.S. trade policy to exclude tariffs on green coffee, we are no longer contemplating another pricing action in early winter. Without this pricing action, we will not fully recover green coffee tariff costs incurred in this fiscal year, which negatively impacts our adjusted earnings per share. I am confident that as we move forward, our portfolio is well positioned for long term sustainable growth with offerings across the value spectrum and 3 of the top 8 brands in the attractive at home coffee category.

In Frozen Handheld and Spreads, net sales declined 5%, primarily driven by decreases for Jif peanut butter and Smucker's fruit spreads, partially offset by an increase for Uncrustables Sandwiches. In the quarter, Jif peanut butter declined 12%, which reflects lapping consumer activity associated with multiple hurricanes in the prior year. Overall, our spreads portfolio continues to navigate consumer and evolving category trends, which we now anticipate will continue for the remainder of the fiscal year.

We are evolving our spreads portfolio to meet the needs of the consumer. One example is Jif peanut butter and chocolate flavored spread. This innovation has been highly incremental to the brand and the category. We will continue to bring innovation to our leading spreads business and see opportunities to further expand beyond sandwiches and into new usage occasions.

Net sales for the Uncrustables brand grew 4% in the quarter. We anticipate growth for the Uncrustables brand to accelerate to double digits for the remainder of the fiscal year. In Pet Foods, net sales decreased 7%, reflecting a decline for dog snacks and lapping contract manufacturing sales related to the divested pet food brands in the prior year, partially offset by an increase for cat food. The dog snacks category has rebounded in recent periods and cat food continues to demonstrate strong momentum, creating a positive outlook for our portfolio.

Both segments remain highly attractive, supported by favorable category tailwinds, including positive pet population trends with growth expected to continue long term. The humanization of pets is accelerating, leading to premiumization opportunities. And e commerce is gaining strong traction, a channel that aligns with evolving consumer preferences and continues to generate strong growth within our portfolio.

In Sweet Baked Snacks, comparable net sales decreased 3%. We saw a sequential improvement in quarterly net sales year over year performance. Notably, Hostess Donettes and CupCakes demonstrated volume/mix growth of 6% and 7%, respectively, and now represent approximately half the segment.

Segment profit was lower than anticipated, largely driven by higher transition costs related to our bakery consolidation strategy. We anticipate sequential improvement in both net sales growth and absolute segment profit for the remainder of the fiscal year as we continue to advance our strategy and the closure of the Indianapolis manufacturing facility begins to benefit the business.

Overall, we continue to see the Sweet Baked goods category trend in a positive direction, though still pressured from the discretionary nature of the category as consumers remain selective in their spending. In addition, the health of the convenience store channel continues to improve through increased traffic trends, which benefits the Hostess brand as a top 5 snacking brand in the channel.

Finally, in International and Away from Home, comparable net sales grew 10%. Growth was driven by the Away from Home business, which grew net sales double digits in the quarter. Our Away from Home business has seen tremendous growth as we continue to leverage our leading national brands and key growth platforms in Away from Home channels. We remain excited for the future growth opportunities in these channels across our brands in our Away from Home business and anticipate strong double digit growth as the business grows to approximately 10% of total company net sales this fiscal year.

In closing, we continue to focus on managing the elements we can control and on taking actions that position the company for long term growth. This includes making strategic investments in the business, launching consumer led innovation and continuing to shift our portfolio to growth. We remain confident in our ability to successfully navigate the current environment and deliver our financial outlook for this fiscal year while advancing our longer term objectives to increase shareholder value.

As always, I would like to thank our dedicated employees for their unwavering focus, dedication and outstanding contributions. With that, I'll turn it over to Tucker for additional insight on our financials and fiscal 2026 outlook.

Thank you, Mark. Good morning, everyone. I'll begin by giving an overview of our second quarter results, then I'll provide additional details on our financial outlook for fiscal year 2026.

In the quarter, net sales increased 3%. Comparable net sales increased 5%, which excludes prior year sales related to the divested businesses and foreign currency exchange. Comparable net sales includes a $15 million headwind from lapping contract manufacturing sales related to the divested pet food brands in the prior year.

The increase in comparable net sales reflects an 11 percentage point increase from net price realization, primarily driven by higher net pricing for coffee. Comparable net sales also reflects a 6 percentage point decrease from volume mix, driven by decreases for coffee, peanut butter, dog snacks and lapping contract manufacturing sales related to the divested pet food brands in the prior year.

Adjusted gross profit decreased $90 million or 10% compared to the prior year. The decrease reflects higher commodity costs, unfavorable volume mix, tariffs and the noncomparable impact of divestitures, partially offset by higher net price realization. Regarding tariffs, we realized approximately $40 million in expense in our second quarter, which primarily impacted our coffee portfolio in U.S. Retail Coffee and International and Away from Home.

Adjusted operating income decreased $96 million or 20%, reflecting the reduction in adjusted gross profit and an increase in SG&A expenses. The increase in SG&A expenses was driven by increased investments in marketing, partially offset by reduced preproduction expenses related to the new Uncrustables Sandwiches manufacturing facility.

Below operating income, net interest expense was comparable to the prior year as the impact of reduced debt outstanding was offset by higher overall interest rates. The adjusted effective income tax rate was 24% compared to 24.1% in the prior year. Factoring in all these considerations, along with weighted average shares outstanding of 106.9 million, second quarter adjusted earnings per share was $2.10, a decrease of 24% versus the prior year.

Turning to our segment results. In the U.S. Retail Coffee segment, net sales increased 21% versus the prior year. Net price realization increased net sales by 27 percentage points, reflecting higher pricing across the portfolio to recover increased commodity costs. Volume mix decreased net sales by 6 percentage points, reflecting decreases for the Folgers and Dunkin' brands, partially offset by an increase for the Café Bustelo brand.

U.S. Retail Coffee segment profit decreased 24%, primarily reflecting higher commodity costs, tariffs, unfavorable volume mix and increased marketing investments, partially offset by higher net price realization. In U.S. Retail Frozen Handheld and Spreads, net sales decreased 5%. Volume/mix decreased net sales by 8 percentage points, reflecting decreases for peanut butter, fruit spreads and Uncrustables Sandwiches. Net price realization increased net sales by 3 percentage points, driven by higher net pricing for Uncrustables Sandwiches.

U.S. Retail Frozen Handheld and Spreads segment profit decreased 12%, driven by unfavorable volume mix, higher marketing spend and higher costs, partially offset by higher net price realization and lower preproduction expenses primarily related to the new Uncrustables Sandwiches manufacturing facility. In U.S. Retail Pet Foods, net sales decreased 7% versus the prior year. Volume/mix decreased net sales by 8 percentage points, driven by a decrease for dog snacks and lapping contract manufacturing sales related to the divested pet food brands in the prior year.

Net price realization increased net sales by 1 percentage point, primarily reflecting higher net pricing across the portfolio. U.S. Retail Pet Food segment profit increased 2%, reflecting lower costs and higher net price realization, partially offset by unfavorable volume mix.

In the Sweet Baked Snacks segment, net sales decreased 19%. Excluding noncomparable net sales in the prior year related to the divested Voortman business and certain Sweet Baked Snacks value brands, net sales decreased 3%. Volume mix decreased net sales by 2 percentage points, driven by decreases for snack cakes, private label products and breakfast, partially offset by an increase for doughnuts.

Net price realization decreased net sales by 1 percentage point, reflecting lower net pricing across the majority of the portfolio. Segment profit decreased 69%, primarily reflecting higher costs, the impact of the noncomparable segment profit in the prior year related to the divested businesses, unfavorable volume mix and higher marketing spend.

Lastly, in International and Away from Home, net sales increased 9%. Excluding $1.6 million of unfavorable foreign currency exchange, net sales increased 10%. Net price realization contributed 9 percentage points to net sales, primarily driven by higher net pricing for coffee. Volume/mix increased net sales by 1 percentage point, primarily driven by an increase for Uncrustables Sandwiches, partially offset by decreases for coffee, peanut butter and dog snacks.

Net sales for the Away from Home business increased 17%, driven by coffee and Uncrustables Sandwiches. Net sales for the International business decreased 2% on a comparable basis, primarily reflecting decreases for peanut butter and dog snacks, partially offset by an increase for coffee. International and Away from Home segment profit increased 12%, reflecting higher net price realization, lower SG&A expenses and favorable volume mix, partially offset by higher costs and tariffs.

Second quarter free cash flow was $280 million compared to $317 million in the prior year, reflecting the decrease in cash provided by operating activities, partially offset by a decrease in capital expenditures as compared to the prior year. We finished the quarter with a cash and cash equivalent balance of $63 million and a total net debt balance of $7.7 billion. Our trailing 12 month adjusted EBITDA is approximately $1.8 billion. Based on this, our leverage ratio currently stands at 4.2x.

We plan to prioritize debt reduction by paying down $500 million of debt annually this fiscal year and next. With this anticipated deleveraging and overall business growth, we anticipate a leverage ratio of approximately 3x net debt to EBITDA by the end of fiscal year 2027. This level of debt provides the financial flexibility for a balanced approach to capital deployment.

Let me now provide an update on our outlook for fiscal year 2026. We continue to operate in a dynamic and evolving external environment, including tariffs and related trade impacts, regulatory and policy changes, ongoing input inflation and changes in consumer behavior that could impact our fiscal year 2026 outlook. This guidance reflects the company's expectations based on its current understanding of these factors.

We are narrowing our guidance range while maintaining the midpoint of the range. We now anticipate full year net sales guidance to increase 3.5% to 4.5% compared to the prior year. This guidance reflects a $135 million headwind from lapping sales of the divested Voortman business and certain Sweet Baked Snacks value brands and a $38 million impact from reduced contract manufacturing sales related to the divested pet food brands as the arrangement was exited last fiscal year.

We continue to expect comparable net sales to increase approximately 5.5% at the midpoint, which includes the unfavorable impact of the reduced contract manufacturing sales related to the divested pet food brands. This growth reflects higher net price realization versus the prior year, primarily due to pricing actions across our coffee portfolio in response to higher grain coffee costs. The increase in comparable net sales reflects volume mix growth for the Uncrustables, Meow Mix and Café Bustelo brands and the Away from Home business versus the prior year.

Our net sales guidance reflects the following changes from our previous expectations. higher net sales in U.S. retail coffee for the fiscal year, reflecting improved price elasticity of demand assumptions in relation to the May and August pricing actions taken this year. higher net sales in our Away from Home business, reflecting ongoing momentum of the Uncrustables brand and our coffee portfolio, reduced net sales in U.S. Retail Frozen Handheld and Spreads and given the recent change to remove tariffs on green coffee, we are no longer contemplating another pricing action in U.S. retail coffee in early winter.

We now anticipate an adjusted gross profit margin of approximately 35% for the fiscal year. We now expect SG&A expenses to be in line versus the prior year, primarily reflecting benefits from cost savings initiatives and reduced spend across the company versus previous expectations. Total marketing expense is estimated to be approximately 5.5% of net sales, reflecting an increase in absolute marketing dollars versus the prior year, which reflects increased investments for the Uncrustables and Café Bustelo brands.

We continue to anticipate net interest expense of approximately $380 million and an adjusted effective income tax rate of 23.8%, along with a full year weighted average share count of 106.9 million. Taking all these factors into consideration, we are narrowing our full year adjusted earnings per share guidance range to $8.75 to $9.25, which maintains the previous $9 midpoint of the guidance range.

Our expected earnings range contemplates the recent removal of tariffs on green coffee. Our plan is to no longer consider a winter pricing action to address tariffs on green coffee and U.S. retail coffee. As such, we will maintain a $0.50 unfavorable impact from green coffee tariff costs already incurred in this fiscal year that we will not fully recover. We expect to lap these tariff costs next fiscal year, providing no further changes to U.S. trade policy for green coffee. Further, we are updating our price elasticity of demand assumption in the U.S. Retail Coffee segment to reflect a $0.40 unfavorable net impact to this fiscal year, an improvement versus previous expectations.

We continue to project free cash flow of approximately $975 million at the midpoint of our adjusted earnings per share guidance range with capital expenditures of $325 million for the year. Other key assumptions affecting cash flow include depreciation expense of approximately $350 million, amortization expense of approximately $200 million, share based compensation expense of $35 million and other noncash charges of $110 million.

In the third quarter of the fiscal year, net sales is anticipated to increase mid single digits, which incorporates an impact of $26 million related to the divested Voortman business and certain Sweet Baked Snacks value brands. Comparable net sales is anticipated to increase high single digits, reflecting an increase in net price realization, partially offset by unfavorable volume mix. Net sales also reflects a decline of $6 million of contract manufacturing sales related to the divested pet food brands.

Adjusted earnings per share is expected to decline a mid teen percent, primarily driven by a decrease in adjusted gross profit in U.S. retail coffee and higher SD&A expense. We anticipate adjusted earnings per share will improve sequentially throughout the fiscal year, building earnings momentum and setting us up for an algorithm year or potentially better in fiscal year 2027, absent any significant changes in the green coffee commodity market and consumer regulatory environment, inclusive of U.S. trade policy.

In closing, we are pleased with our second quarter results and remain focused on maintaining a disciplined and responsible financial approach as we navigate this fiscal year. We are continuing to invest strategically in our key growth platforms and are confident in our ability to deliver long term growth and increase shareholder value.

I would like to express my sincere appreciation for our employees. Their commitment to executing with excellence and their passion for our company positions us for continued success. Thank you.

All right. Welcome back. Please find your seats, we'll kick off our next fireside. I'd like to welcome back to our conference, The J.M. Smucker Company. With us today are CEO and Chairman of the Board, Mark Smucker, and CFO, Tucker Marshall, Mark and Tucker are going to go through some brief prepared remarks, and then we'll sit down for some questions. Mark, over to you, and thanks for being here.

Thanks, Andrew. It's always great to be back. And clearly, great to see everyone. Thank you for being here today, whether you're listening online or here in the room. We appreciate you guys taking the time to be with us. Tucker and I will provide some brief comments and then we will reserve the remainder of the time for your questions. But as always, please note that certain information provided today is forward looking based on current views and assumptions.

Also, we use non-GAAP results with the purpose of evaluating performance internally. Details for both items can be found in the slides for today's presentation available on our Investor Relations website. So with that, let's get started. My commentary today will be centered around 3 key points. First, we are confident in the long-term growth potential of the company, driven by the strength of our portfolio of leading brands and the attractive categories in which we operate.

Second, our world-class brand-building model continues to be an advantage for us as consumers turn to brands they know and trust and we continue to bring consumer-led innovation to market. And third, we are focused on delivering on our capital deployment model and our ambition to generate over $1 billion in free cash flow annually.

Each of these reinforces the strong foundation we have established and demonstrates the benefits of our portfolio optimization over the last several years, through which we have fundamentally transformed the company. Our strategy is working. And while we are navigating through a dynamic environment, our portfolio continues to deliver top line growth supported by strong consumer demand for our leading brands.

All of this leaves me with a high level of confidence in our ability to create long-term value for our shareholders. Let me share some examples of how we are prioritizing resources to our largest growth opportunities in each of our businesses through our key growth platforms: Cafe Bustelo, Uncrustables, Meow Mix, Milk-Bone and Hostess brands. Starting with the coffee segment. Our portfolio is performing well as we navigate record high green coffee prices and continue to demonstrate the ability to recover increased commodity costs through responsible pricing.

Overall, price elasticity of demand trends have been favorable to our initial expectations and historical averages. This demonstrates the resilience of the at-home coffee category where we have a strong leadership position with 3 of the top 8 brands and reinforces the strength of our world-class brand-building model. We are focusing resources on the Cafe Bustelo brand, which continues to be one of the fastest-growing brands in the at-home coffee category.

Cafe Bustelo has tremendous momentum which we continue to fuel through a national marketing campaign with creative that build upon the distinctive and unique Esta Aqui campaign. We also launched innovation through new roast profiles now in market. This includes medium and dark roast expanding from the brand's traditional espresso brew to blends that can be brewed more easily in traditional drip brewers so to appeal to younger, more diverse buyers while remaining authentic to its Latin roots.

In cold coffee, we are providing consumers with convenient offerings to drive incremental occasions. We recently launched Cafe Bustelo multi-serve and we are launching the Cafe Bustelo brand into a single-serve ready-to-drink format later this month. Take a look at some of our new marketing.

[Presentation]

Our proven brand-building model continues to give us confidence in our ambition for Cafe Bustelo to become a top 4 brand in the at-home coffee category. Our actions will increase brand awareness and household penetration, and we are excited about the opportunities ahead. Next, our frozen handheld and spreads business and the Uncrustables brand.

This fiscal year, we anticipate growing annual net sales for the Uncrustables brand to over $1 billion. Growth will be driven by our brand-building model through a national advertising campaign, distribution gains and innovation. Let me touch on each of these. For marketing, we are still early in our journey, but the results are impressive. Since we turned on demand-generating activities, we have made significant strides in household penetration growth adding over 4 million new households in the last year alone. And the brand continues to infuse itself throughout pop culture and social media.

Let's take a look at some recent influencer content at the Little League World Series.

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From a distribution perspective, we continue to gain traditional freezer space and are also expanding into convenience stores. This new channel will not only provide more availability for the Uncrustables brand, but also unlocks the benefit of immediate consumption. Uncrustable sandwiches are now selling in over 30,000 convenience stores and more than 2/3 of the top 100 chains are either selling Uncrustables sandwiches or have committed to distribution.

We are also seeing the benefits of accelerating our innovation efforts, Take, for example, the new Uncrustables peanut butter and Raspberry Spread sandwich. We anticipate this innovation will generate over $50 million in net sales this fiscal year and is proving to be highly incremental. We also launched a new Berry Burst variety for the summer and are excited to launch a new peanut buttered choco craze variety this fall, which we have in the back to taste.

This regular cadence of limited edition flavors continues to generate excitement for the brand experience, and we will continue to bring consumer-led innovation to market. To that end, we are excited to announce we are launching a new Uncrustable sandwich variety focused on higher protein. We have already received strong retailer acceptance with distribution expected later this calendar year. Though our growth has been tremendous, we remain most excited about the future.

The #1 SKU in the total frozen category is an Uncrustable sandwich with 2 SKUs in the top 10. The Uncrustables brand is leading the entire frozen category and new buyers for households with kids, Millennials and Gen Z. We are creating a truly iconic brand with widespread multigenerational appeal, which will soon be a top 3 brand in the total freezer aisle. For our Pet segment, we have leading brands in Milk-Bone dog snacks and Meow Mix cat food. Pet population trends continue to be positive and are expected to grow over the long term.

And as the pet population has grown, so has the humanization of the category. We continue to drive this trend by launching the first dog treat featuring a human food brand, with Milk-Bone peanut buttery bites made with Jif Peanut Butter. This innovation exceeded our expectations and was the largest dog treat launch in the category last year. Given its success, we see a tremendous opportunity in this brand partnership as a platform for future growth.

We will be extending the Jif and Milk-Bone brands collaboration with innovation launching early next calendar year. And we continue to focus on the next generation of pet parents that are still forming their treating preferences. The Milk-Bone brand is in a strong position as a trusted brand in the category to build deeper connections with these young consumers through culturally relevant and engaging marketing that matches their evolving media consumption.

We are even partnering with superheroes. Take a look.

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Shifting to cat food. We have strong momentum with the Meow Mix brand, and the cat category is experiencing tailwinds in pet population growth with U.S. cat households continuing to grow. Our innovation also continues to demonstrate strong results as we are elevating the mealtime experience through Milk-Bone Gravy Bursts.

This innovation brings gravy indulgence to the dry aisle providing excitement for cats and convenience for pet parents. Meow Mix Gravy Bursts is the top dry cat category innovation this year. Next, the Hostess brand, where we are executing on our 3 priorities to stabilize and position the brand for long-term growth by strengthening the portfolio, elevating our execution, and reigniting sustainable growth.

We are advancing this strategy by continuing to take decisive actions, most recently by reducing our SKU count by 25% to simplify our offerings as we prioritize high velocity and margin accretive SKUs. We are closing the Indianapolis manufacturing facility, which will deliver $30 million in annual cost savings. And we continue to apply our proven brand-building model through culturally relevant marketing and refreshed packaging. Our speakie snackie advertising campaign is is culturally relevant and speaks to the entire universe of sweet snackers. See for yourself.

[Presentation]

Our new marketing campaign continues to deliver strong results with unaided awareness and purchase intent both increasing double digits for our target market. The campaign has also successfully increased consumer sentiment attributes around both taste and loyalty. These actions support our strategy by driving share and velocity performance and aligning segment margins with the company average.

We are already seeing results from our strategy as base velocities are improving, we have returned to share growth at several key customers and segment profit improved sequentially in the first quarter. As we look to the future and reigniting sustainable growth, we are focusing on the unique areas of strength -- by evolving our demand creation strategy and shifting our innovation strategy to ensure we are strengthening the iconic parts of the Hostess portfolio.

This includes Hostess Cupcake Minis and [indiscernible] Donettes. And we are bringing back the iconic Hostess Suzy Q's this month. We continue to apply our proven brand-building model to Hostess which remains an iconic brand with strong awareness, category-leading household penetration and beloved products. In closing, the investments in our brands, our portfolio optimization and our focus on our key platforms is driving top line growth and continues to give us confidence in sustaining momentum for the business. Our strategy is working and we are well positioned to deliver long-term growth and increase shareholder value.

I'll now turn the discussion over to Tucker.

Thank you, Mark. Good afternoon, everyone. It's great to join you for this year's conference. As Mark highlighted, although we are navigating near-term dynamics, we continue to feel confident in the long-term growth potential of the company as we execute on our strategy and successfully manage those things that we can control. .

We did exactly this in our first quarter and are pleased with our start to our fiscal year. Our first quarter results and business momentum, primarily in our coffee portfolio, gave us confidence to raise our full year net sales guidance to 3% to 5% growth compared to the prior year. Given the current external environment, we maintained our adjusted earnings per share guidance range of $8.50 to $9.50.

The increase in our net sales guidance will be offset by what we anticipate to be a higher cost impact from U.S. tariffs. We remain confident in our ability to deliver consistent execution toward our financial targets. Turning toward our longer-term expectations, which is comprised of the following: low single-digit net sales growth, mid-single-digit operating income growth, high single-digit adjusted earnings per share growth and total shareholder return of approximately 10% or greater when considering our dividend policy.

We see these objectives as steady, compelling and compounding including a commitment to a disciplined capital deployment model. Our company has consistently demonstrated the ability to generate strong cash flow that allows us to take a balanced approach to capital deployment in support of shareholder value creation, including investing in the growth of our business, paying down debt and returning capital through quarterly dividends and opportunistic share repurchases. Our objective remains to generate at least $1 billion in free cash flow annually. Business growth, working capital management and a reduced level of capital expenditures are the key components to achieving this.

Our long-term strategic target for capital expenditures continues to be approximately 3.5% of net sales. Capital expenditures have been elevated for the last 5 years, primarily driven by our efforts to support the rapid growth and required capacity expansion for Uncrustables sandwiches.

This fiscal year, we expect to finish at approximately 3.6% of net sales at the midpoint of our guidance range. We plan to prioritize debt reduction by paying down $500 million of debt annually this fiscal year and next. With this anticipated debt reduction and overall business growth, we anticipate a leverage ratio at or below 3x net debt to EBITDA by the end of our fiscal year 2027. This level of leverage provides the financial flexibility for a balanced approach to capital deployment.

Finally, we remain committed to our dividend which has increased at a 6% compounded annual growth rate over the past 10 fiscal years. In July, we announced that we increased the dividend for the 24th consecutive fiscal year. We expect our Board to maintain the company's current dividend policy, which is to return approximately 40% to 45% of our annual adjusted earnings per share to shareholders reflecting dividend growth consistent with future earnings growth.

Our capital deployment model also enables us to reinvest in the business and fund our largest growth opportunities while delivering sustainable returns for shareholders. Looking forward, we remain committed to delivering total shareholder return of approximately 10% or greater over the long term.

In closing, we remain confident in our strategy and our ability to deliver continued growth across our portfolio, and we are well positioned to deliver consistent and long-term sustainable growth for our shareholders. Thank you for your time today. Andrew, I'll hand it to you.

Thanks very much, Mark and Tucker. Maybe to jump in, Smucker just reported fiscal first quarter earnings last week. What are the couple of key takeaways that you want investors to come away with from recent results?

Well, Andrew, first of all, I would say obviously, in our prepared remarks, we really are focused on delivering our strategy. And as you know, we've been on this journey for the last few years to really get our portfolio focused and where we think it needs to be to deliver that growth, and we're very pleased with the portfolio as it stands today.

And we're delivering on our commitment and our own expectations in terms of what we put out there for guidance. And we increased our guidance. We delivered in the quarter, 3% comparable growth, and then raised our top line guidance by 1 point based largely on the performance of coffee and supported by Uncrustables and our performance on Meow Mix. And so just despite the fact that we're in this very uncertain environment where costs are changing, you have highly elevated coffee costs, we have tariffs, we have other factors at play.

The fact that we've been able to continue to deliver organic growth is one of the most important things that we really want to communicate to our investors and our confidence and our ability to sustain that over time.

The company delivered comparable sales in fiscal 1Q, certainly well above your initial expectations. Results were a bit nuanced, as you mentioned, because obviously, there was really good strength in U.S. Retail Coffee, which helped drive the upside. The other retail segments were a bit below track consumption data. I guess sticking with coffee for the minute, some of the upside was largely due to volume elasticity that so far has been more modest than initially forecast. What are you seeing in the coffee category overall right now in terms of consumer behavior in response to the industry pricing? And why is it do you think that elasticity has held up as well as it has so far? .

So answering the last part first. again, we have great -- we have a great coffee portfolio. We play across the spectrum of value. We have premium brands. We have more affordable brands and overall, the -- our portfolio is performing. Part of the reason why we see consumption still reasonably solid is because it's affordable to drink coffee at home.

Despite the significant inflation, we continue to see about 70% or more of cups consumed are consumed at home. I mean the cup of coffee that you brew in a regular drip brewer is about $0.10 to $0.15 a cup versus what you might -- if you go out for it or if you -- in other forms. And so it's still very affordable.

We're pleased with the elasticity performance. But what we want to make sure that we remind our shareholders is that we are at a moment in time with the most significant coffee inflation that we've ever seen in history. And prices have never been at these levels for green coffee. And so as you know, we've taken multiple price increases. On top of that, you've got tariffs. Recently, you have new tariffs as it relates to Brazil specifically, where 1/3 of the world's coffee has grown.

And so because of the significant pricing, obviously, the underlying cost, we feel that we just have got to take a very prudent approach, and we are not projecting beyond sort of normalized elasticities going forward, because we expect the inflation is going to continue. And then eventually, and no one knows when we may see some moderation. .

Yes, makes sense. The company is able to deliver EPS certainly above expectations in the first quarter, but you maintained your full year outlook. And a lot of this had to do with what's been obviously favorable coffee elasticity thus far, but being offset by some incremental tariff pressure. I guess moving forward, assuming tariffs stay where they are, if the company is able to continue to over deliver on the fundamentals, perhaps elasticity, assumptions continue to prove conservative, we'll see. How do we think about the upside that could flow through to the bottom line.

Obviously, EPS is expected to be lower this year year-over-year, again, because of inflation. I'm trying to get a sense, will the company try and recoup as much of earnings as it can? Or would you lean further into reinvestment given the still dynamic consumer environment. Trying to get a sense whether, as you mentioned, fiscal '27 has the potential I mean on how things go to be well above kind of algorithm mirror?

Yes, Andrew, we're very pleased with our first quarter results. As Mark shared, largely driven by the performance of our coffee portfolio. And that portfolio is really just demonstrating the resilience of not only the category, but also our brands within the category. And our outlook for coffee is a key driver to our full fiscal year and elasticities for our summer time pricing have really come in better than anticipated.

We're sort of taking a historical view in our late summer pricing activities and we're taking a little bit of a greater than historical view on the price elasticity of assumption for the kind of the winter months in terms of pricing. But as we think about delivering our fiscal year, we think that we have a prudent guidance out both in top line and bottom line. I think the important thing is for us to take it quarter-by-quarter to understand not only the performance within U.S. Retail Coffee, but also the balance of our portfolio. We will always balance return and reinvestments from a bottom line standpoint. We understand the importance of building back earnings over time, but we also understand the importance of investing in our brands in our portfolio.

And we would also share that we should see sequential improvement, not only from a bottom line standpoint throughout our portfolio as we go through the balance of the fiscal year, but we will also see the margin profile within our U.S. Retail Coffee business improve as we get to the fourth quarter as well. We think all of this bodes well to not only set up the long-term success and health of the company, but really to begin then thinking about what the outlook could look like for next fiscal year.

Right. In Sweet Baked Snacks, you delivered sequential net sales and margin improvement in the first quarter. How are you thinking about the progress of Sweet Baked Snacks, stabilization throughout the course of the fiscal year, I guess, from a top and bottom line perspective. And what should we expect to see in terms of track data? And do you believe we can return the brand back to being stable year-over-year or even modest growth by year-end.

So first of all, I really believe in this brand. It's a great brand. It is iconic. Our degree of focus that we're bringing back to the portfolio, both in terms of the actual products offered as well as our manufacturing footprint are going to help us deliver both improvement or at least stabilization in the near term for both top and bottom line.

We do expect to see sequential profit improvement over the course of the year. And although we are very much the early innings of the stabilization work, we're starting to see some green shoots, and we talked about that last week on our call, things like improved shared performance at two of our largest and most significant traditional customers.

We're starting to see improving trends in the convenience channel. And then with Donettes the #1 Donettes offered in these channels, we're actually seeing growth there. And so the breakfast occasion continues to be a very strong occasion. So continuing to build on the strengths that we have. Those green shoots are what continue to give us hope that we can continue down the stabilization journey and over time, return the brand to growth.

And within the U.S. retail, frozen and handheld and spreads, how is Uncrustables performing? What are the company's expectations going forward for the brand specifically? And what are we seeing in sort of recent scanner or tracked Nielsen trends?

So we're seeing excellent performance in Uncrustables. The brand continues to have tons of runway in the last, call it, year plus, we gained a lot of new distribution, both in our existing channels where we got essentially more freezer space. You heard us talk a little bit about the convenience channel.

Obviously, in the Away From Home area, we've seen some growth there. What we're really excited about is the innovation. You heard about the Raspberry peanut butter -- Raspberry peanut butter and mixed Berry, which is a limited time offering. And then just in the prepared remarks, talked about a higher protein offering, which is very welcomed by consumers.

There's basically two flavors [ Up ] and Apple, which is in peanut butter and Apple, cinnamon Jelly execution and then another Berry [ Bright-eyed Berry ] is the name of the product. And we are targeting these products at the breakfast occasion, the morning occasion because that is where consumers seem to gravitate to a higher protein content, although it will be, of course, available throughout the day. But we're really excited about that offering and the continued ability for us to offer new flavors and limited time offerings should continue to real growth.

Great. There's been an increasing level of competition. in the PB&J sort of sandwich space. How do you think about these newer entrants? How do you ensure that that Uncrustables remains advantaged. Nothing attracts attention like growth. Obviously, you've been showing a lot of it within Uncrustables. So it should be to be expected, there'd be more. But what are your expectations in terms of what you'll see competitively? And how do you manage that?

So we knew that this moment was coming because, obviously, it's a great product concept, and it's done extremely well. It starts with our brand building support. We've obviously have this proven model the -- you saw some of the influencer work earlier, but also our traditional advertising and marketing campaign is going to continue to fuel growth.

Our partnerships with retailers. And then on the supply chain side, as you know, we've invested for 2 decades to build out the manufacturing footprint for this brand, and we feel that we have a ton of runway and capacity that give us a unique first-mover advantage. And so we can leverage the entire ecosystem of brand building, customer relationships and, quite frankly, just brand love for this product that will continue to fuel growth. .

Your away-from-home business continues to deliver net sales growth and margin expectation in an industry that's been certainly challenged around the consumer environment. Can you help us understand what differentiates that business? And what are your aspirations for this business from a top and bottom line perspective? .

So first of all, we play in multiple segments, whether that's office coffee, liquid coffee, obviously, Uncrustables has multiple places that it can go. We have our tabletop Jif and Smucker portion control products. I think what gives us uniqueness is that about 3/4 of our Away From Home portfolio is branded, right? We generally do not play in the back of house.

So the end user is always seeing our brand in almost every one of those consumption occasions -- and so that continues to be a virtuous cycle with the rest of our business. And so really excited about our Away from Home overall. And then I would say we have a great team that really understands both how to build relationships in these channels and really leverage the strength of our brands building on what consumers are looking for, all of that gives us great optimism for that business.

U.S. Retail Pet Foods experienced a bit of a shortfall in the recent quarter as well. You lowered the full year revenue outlook for that business by about $10 million. You spoke about some weakness in secondary brands, but also spoke about some slight signs of improvement at the broader category level. Maybe you can provide a bit more detail on some of these dynamics.

So yes, Meow Mixl max has been performing very well. The innovation, the gravy birth has helped support that. And of course, Meow Mix is a very affordable brand. So both the replatforming the brand, the innovation, all support that as well as, of course, the brand building efforts. We have spoken a bit about the softness in Milk-Bone and just acknowledge that in a discretionary category like pet snacks.

Consumers are being a bit more cautious. They are treating their pets less frequently than they may have, say, during the pandemic. But what gives us optimism about Milk Bone is its historical performance, playing across the entire spectrum of value of the category. Also, thinking about innovation where there's so many different treating occasions.

The performance of the peanut buttery bites gives us optimism about how we can continue to expand the portfolio and innovate, because news obviously helps drive this category as well. So again, a combination of brand building and focusing on where the consumer is going over time, we believe we can get that brand back to growth as well. .

Okay. All right. I think we'll have to cut it there for time. But please join us right next door in the breakout, and please join me in thanking Mark and Tucker.

Thank you.

Good morning, and welcome to The J.M. Smucker Company's Fiscal 2026 First Quarter Earnings Question-and-Answer session. This conference call is being recorded. [Operator Instructions]. I'd like to turn the conference over to Crystal Beiting, Vice President, Investor Relations and Financial Planning and Analysis. Thank you. You may begin.

Good morning, and thank you for joining our fiscal 2026 first quarter earnings question-and-answer session. I hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website at jmsmucker.com. We will also post an audio replay of this call at the conclusion of this morning's Q&A session.

During today's call, we may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, we use non-GAAP results to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning's press release.

Participating on this call are Mark Smucker, Chief Executive Officer and Chair of the Board; and Tucker Marshall, Chief Financial Officer. We will now open the call for questions. Operator, please queue up the first question.

[Operator Instructions] Our first question is coming from Andrew Lazar from Barclays.

I think last quarter, Smucker mentioned that the pricing would benefit the Coffee segment sales by about 20% for fiscal '26. With new tariff headwinds since that time, I guess what was your updated expectation on pricing benefit in this segment be now? And was that included as part of the August price increase? Or is there still more likely to come?

Andrew, yes, the current outlook for pricing in the Coffee segment is going to be in the mid-20s now. That would include additional pricing actions in the early winter associated with the increased tariff rates that we're experiencing on green coffee. And then furthermore, we would likely see an impact to volume in the low to mid-teens therefore, having kind of a low- to mid-teens overall growth for the segment year-over-year.

Great, really helpful. And then last quarter, the company mentioned that first quarter EPS would be the softest quarter and that 2Q and 3Q would be consistent with each other. And now I think the second quarter decline is expected to be greater than the first quarter decline and maybe more muted than 3Q. So I'm just curious kind of what changed there to sort of cause that shifting in what appears to be a shift in sort of phasing?

Andrew, so as you know, our outlook for the full year has not changed at the midpoint. We still have a $9 midpoint guidance range. We do see favorability coming through our fiscal year as a result of better-than-anticipated price elasticity of demand assumptions through our coffee portfolio, but that benefit is being offset by increased tariffs that we're experiencing since our original guidance.

And then to your point, in our first quarter, we did experience some additional coffee costs greater than we anticipated. We always knew that the first quarter was going to be our highest coffee cost quarter, came in a little higher than anticipated. The outlook also anticipates that in our second quarter, just due to the timing of our hedging activity along with the physical receipt of green coffee. We'll have some additional costs in the second quarter, that is causing our outlook change for the second quarter. But overall, we do see coffee in line with profit expectations coming into the fiscal year based on where we stand now after absorbing the incremental tariffs.

Next question is coming from Peter Galbo, Bank of America.

Tucker, I was hoping maybe we could pick up on the coffee piece there. The elasticity, I think, that you've assumed now was about $0.20 better than you had at Q4 with the additional $0.25 on tariffs, so netting about $0.05 worse I was just hoping maybe you could help us gross that up to the top line level. I think from an elasticity perspective, you were assuming about 0.4 or 0.5 before. Just want to understand kind of where that number on a holistic basis has moved to now?

Sure. So I think if we take a step back, we really have several pricing actions that are flowing through our fiscal year. The first was in the May time frame. The second is in the August time frame. And then likely in the early winter, there will be a third action as well. And what we did coming into the fiscal year is, on average, across our entire portfolio over an entire fiscal year was about a 0.5 elasticity. And what we've experienced through our May pricing is a slightly better factor that enabled us to have a very strong first quarter within our Coffee portfolio, kind of over-delivering expectations of about $50 million.

We've taken that assumption throughout the balance of the fiscal year, which is really enabling us to call up coffee about $100 million on a full year basis due to the implications of price elasticity of demand factors. Our August pricing, we're still kind of keeping at that 0.5 factor, which is the historical elasticity. And then any future pricing actions that we would take in early winter that would largely be a greater elasticity factor than historical just due to the timing and nature and also the fact that we're taking so much pricing in one fiscal year, as we just called out in Andrew's question kind of in the mid-20%. Hopefully, that helps.

Yes. And then, Mark, as a follow-up, I think in your prepared remarks, you talked about Milk-Bone returning to growth in the second half of this fiscal year. And I just wanted to understand that comment was really driven by just some of the compares and some of the one-offs that happened in the second half of last year or if your expectation is that consumption in Milk-Bone actually returned to positive growth in the second half as well? And maybe you can just remind us again on some of the dynamics on the year-over-year.

Sure, Peter. Yes, you are correct, that we will have some strong comps in the back half, which will help. What I would highlight about Milk-Bone is that the brand, we continue to support the brand, obviously, through advertising, the innovation on the PB Bites. We have seasonals coming, and we will tactically sharpen some specific price points or used promo where we need to. But we still have high confidence in the brand but acknowledge that because the consumer discretionary categories continues to be a bit cautious. We have seen the frequency of pet parents treating their pets go down a little bit.

But because of all of the actions that I just highlighted and the continued support that we will provide to the brand, the fact that it has so many different varieties and plays across the value spectrum. We still have high hopes for that brand, and we'll continue to support it all the way through the fiscal year.

The next question is coming from Robert Moskow from TD Cowen.

I was wondering in your discussion about Sweet Baked Snacks and explained the volume decline in the quarter. I didn't mention -- I didn't notice any mention of the SKU rationalization impacting the volume. I wanted to know if that impacted it as well?

And then secondly, can you give a little more detail on the dedicated sales organization that you're putting in place? How is it different from your go-to-market approach currently? And what do you expect to get out of it?

Sure, Rob, it's Mark. First, on the sales, we have a dedicated convenient store sales force, which we've had from the outset, and that obviously is a core competency of the business. And then just more broadly, in totality, a dedicated sales force, it's -- it functions similar to our total sales force. It's just focus. It's really all about making sure that we're focused on the right things and getting the execution that we need all the way down to the store shelves.

And as it relates to the SKU rationalization, we won't be through the work of rationalizing those SKUs until -- through the second quarter. And we do expect that, over time, the remaining portfolio will continue to replace those sales and overall improve profitability in the segment. And then finally, I might just add that although it was in the prepared remarks, I'd love to just emphasize that we are starting to see some green shoots as we are referring to them in terms of things like the convenience channel slightly improving in terms of health and traffic. We've had good share performance at some of our most important traditional retail and mass customers. I mentioned the profit performance.

And then just overall, the focus that we're bringing to the portfolio over time will benefit the brand. And then finally, I think one of the highlights is Donettes, and the fact that the breakfast occasion continues to be strong, and we have seen good growth out of our Donettes brand.

And did the rationalization impact volume in first quarter?

It did not.

Next question today is coming from Tom Palmer from JPMorgan.

I wanted to follow up on Andrew's question about the guidance and kind of implications for the cadence. So you reiterated the annual address maybe some incremental weakness for the second quarter. That would seem to suggest that maybe the back half of the year is a bit better than you previously anticipated. I just wanted to clarify what's driving that improvement in the second half versus what you expected previously?

Yes. So I think there's a couple of factors. One is, in the first half, we just have timing of coffee costs coming through our first and second quarters, but the profit outlook for coffee remains intact with our original expectations coming into the fiscal year, after absorbing an incremental $0.25 of tariffs, but yet experiencing a positive $0.20 tailwind associated with favorable elasticities. And so really, what we're doing is we're just shifting some of the profit to our third and fourth quarters, but we remain focused on the midpoint of our guidance range at this point in time.

And then on the Sweet Baked Snacks, the SKU reduction, when does the actions you're taking start to impact the earnings line. Is that we should look for a sequential improvement as we move through the second half of fiscal '26, or is it more a consideration for fiscal '27?

Yes. So we've outlined a $30 million savings benefit associated with SKU rationalization in the closure of our Indianapolis bakery. And we'll begin to see about $10 million of that benefit flow through our fourth quarter with the balance or $20 million impacting or benefiting fiscal year '27 and profitability in Sweet Baked Snacks should improve sequentially as we move through the fiscal year with the fourth quarter being our strongest, and that would also track with the top line.

Next question is coming from Peter Grom from UBS.

In the prepared remarks, you touched on the sequential momentum that you're seeing that should set up for an on-algorithm year or better in fiscal '27. So just given that we're one quarter into fiscal '26, can you just talk about the level of confidence or visibility you have to that at this stage?

Our visibility into next fiscal year continues to be sort of a work in progress. But I think what we were trying to highlight is as we think about the Coffee portfolio, our strongest margins will be in the fourth quarter, which would be in the mid-20s. So you'd have a nice exit rate within your green coffee portfolio or your overall coffee business.

Two is, as you see the ongoing benefits of the stabilization efforts within the Hostess portfolio, and then you see the continued momentum of your growth brands around Uncrustables, Meow Mix, Milk-Bone as well, would just enable us to give some point of view as it relates to how we're thinking about next fiscal year, and we also continue to navigate the overall tariff environment.

Great. That's super helpful. And then just a follow-up just in terms of phasing on the top line, but more how you see price relative to volume mix I think the presentation shows an expectation for 10% price for the year and vol/mix down 4%. So just curious how you see that evolving from here? And then specifically on coffee pricing, 18% in the first quarter expectation for mid-20% for the year. Any thoughts you can share on what that ramp looks like given the August increase and now that the potential winter increase as well?

Yes. So coffee, let's begin with coffee. Coffee being in the mid-20s. We saw 18% come to Q1. You'll feel basically in the mid-20s in your second and third quarter, and then your fourth quarter, you'd be slightly ahead of that as you think about the coffee portfolio.

And then just in terms of the overall sales ramp for the full fiscal year, I would just acknowledge that we continue to get sequentially better as we move through the balance of the year.

Our next question today is coming from Megan Clapp from Morgan Stanley.

I wanted to ask about the increased free cash flow outlook. It seems like there's a onetime benefit coming through this year. But just wondered if you could talk high level about that -- how that what you're expecting to do with that increased cash? How we should think about maybe pace of de-leveraging going forward?

Megan, Yes, we did increase our free cash flow outlook from $875 million to $975 million for the full fiscal year. That increase of $100 million is largely driven by the benefits coming through the One Big Beautiful Bill Act. And it is not a onetime benefit. It will be an ongoing annual benefit as we move forward into subsequent fiscal years.

We plan to use the proceeds or incremental cash to support our ongoing debt pay-down efforts in order to achieve our 3x leverage profile by the end of fiscal year '27.

That's helpful. And then maybe just on the 2Q comparable net sales outlook. I think in the prepared remarks, you said mid-single-digit. It's a bit above, I guess, where the scanner data has been tracking more recently? I know we'll get this August price increase in coffee, which will help. But it does seem like there's maybe some dynamics with Sweet Baked Snacks and the SKU reduction and maybe some sequential improvement in Pet. So I just wondered if you could just help us unpack as we think about tracking the scanner data over the next couple of quarters, which segments we should expect to see kind of sequential improvement and how we should think about that in terms of the reported sales?

Yes. You'll see continued momentum in coffee, as we discussed. Within frozen handheld and spreads, you'll see the momentum coming through the Uncrustables brand or portfolio. As you think about in our Pet segment, you'll see the ongoing momentum in our cat food portfolio, and you'll see the ongoing kind of stabilization efforts coming through within Sweet Baked Snacks. And then our Away From Home business continues to be a bright spot in our portfolio as well.

Next question is coming from Alexia Howard from Bernstein.

Can I ask on coffee first of all, there was no mention of potentially pursuing tariff exemptions in the mitigating activities that you're pursuing. Is there a chance that application for an exemption on the tariffs because obvious coffee can't be grown in the U.S. could be a possibility further down the road?

Thanks, Alexia. It's Mark. We continue to monitor and assess any changes that we're seeing to trade policy and tariffs. And obviously, where we're really focused is working through our industry associations to advocate for policymakers and ultimately are really striving to get the best outcomes for our consumers. But at this point, we don't have anything to report in terms of any further relief. But as if anything does come through, we would certainly reflect that in our guidance.

And then as a follow-up, on the Hostess business, are you seeing any impact from GLP-1 drugs specifically? And should we be concerned that with pill versions coming out early in '26 that there might be some incremental pressure over the course of next year?

Thanks, Alexia. I was expecting that question. And we've said in the past, we still monitor this and really take a close look at the impact of GLP-1s and what they're having on food generally and more specifically, our business, and we update our outlook monthly on that. And to this -- up to this point, we still don't see any meaningful impact in our categories, and we'll continue to make sure that we're offering the consumer products and variants of products that they're seeking, whether that could be reduced sugar or portion sizes and so forth. So we feel like the portfolio is very well positioned to address those types of issues, and we'll continue to monitor.

Next question is coming from Max Gumport from BNP Paribas.

Trying to get a better sense for -- on your updated coffee assumptions. So it sounds that you now expect to see mid-20% pricing this year. You expect to see a volume impact in the down to the low to mid-teens, resulting in sales in the low to mid-teens. So it sounds like overall elasticity is still expected to be about 0.5x, so in line with what you expected before. I think it sounds like that's because earlier price increases are now better than expected. August will be roughly in line with historical of 0.5x and then winter much worse. If that's all true, how do we square that with the commentary that the combined impact of coffee and tariffs is still to be roughly $0.80 to $0.85 headwind -- to or I guess no real change in the combined impact despite the fact that volume is going to be much worse than you expected before it feels like. Can you just give a bit more color on that?

Yes. So Max, I think the way that you've framed in the pricing and the volume and the current outlook for growth for the business is correct based on our prepared remarks and some questions I've already answered previously. I would say that what we're seeing is, is that coffee outlook has gone up by $100 million for the full fiscal year. Much of that came through Q1 and much of that is sharpening the pencil on early pricing actions and the impact of price elasticity of demand.

When you kind of factor that in, that is a $0.20 benefit to your guidance range. But unfortunately, tariff rates have gone above 10%, and we have to react to that. And we now have a net $0.25 impact, which is largely coming through our coffee portfolio, which is just basically bringing them back to their financial plan at profit for the year. So we do view this as a good story and the resilience of the overall coffee category, the strength of our brands in the category. But unfortunately, there's just factors beyond our control that are not enabling us to take either the profit up in the business unit or taking up our guidance as a result of increased tariff.

Great. And then Mark, going back to the last question on GLP-1 drugs and your monthly research show no real impact. So far, can you provide a bit more color on what the -- what your studies are showing in terms of -- I assume they are showing that consumers on GLP-1 drugs are eating less food given we know these drugs are effective at reducing weight. But if that's true, why are you not seeing an impact? Are you saying that your categories are not the categories where consumers are reducing their food consumption? Or are there other parts of the story I'm missing. Just curious for a bit more color on what you are seeing given you are doing a pretty detailed research on this topic.

Of course, Max, thanks. So first of all, the data that we look at is across a very pretty broad variety of sources. And as we all know that these drugs do reduce appetite and cause folks to eat less, I would highlight that our category is various parts of our category don't really fall into at all the areas that people might consume less, like coffee, beverages and of course, Pet. And so where you might see in our other foods, frozen handheld and spreads and Hostess, I think everyone likes to focus on Hostess.

The fact is people who are consuming Uncrustables for the most part, are athletes, families with kids, universities. We're now and have really good performance in convenience stores. And so from an Uncrustables standpoint and a spread's standpoint, we really haven't seen any impact at all. from the GLP-1. And then as you would expect on Hostess because it's a sweet, people still do look to reward themselves with something small, potentially and indulgent throughout the day. And the snacking trends still indicate that about 70% of consumers are still snacking twice a day. And that it might be salty, it might be sweet, what have you.

But at the end of the day, as we look at who is consuming our products, we have not seen a meaningful impact from these drugs on the categories that might be affected.

Next question is coming from Scott Marks from Jefferies.

First thing I wanted to ask about, maybe just a clarification, the Hostess SKU reduction. It sounds like it's maybe some long tail SKUs, some smaller SKUs. Just wondering if you can clarify maybe how much in sales that represents of that part of the business and how we should think about the impact of that for this year?

It's a combination. It is mostly long-tailed SKUs, and it is SKUs that are not generating the requisite profit impact. right? And so really getting focused on the brands, the sub-brands, if you will, in under Hostess and the products that are going to drive both growth in top and bottom line are where we're focused. I would not spend too much time focusing on the sales because we do believe that we can offset the sales by growth in the more important sub-brands.

So for example, Donettes is 3x the size of the next closest brand, which is Cupcakes. And so with Donettes, growth there is good and then continuing to focus on the other occasions outside of breakfast will help us support brands like Cupcakes and Twinkies.

Understood. And second question, comes back to one that was asked earlier just around kind of the tariff situation on coffee. If, for instance, some exemption does come through on that, how maybe should we be thinking about the pricing actions that you mentioned in the winter? Or how long might that take to be reflective in your P&L? Just trying to gauge what the impacts would be and how long they might take to show up?

Yes, Scott. So we now have embedded net $0.50 negative impact due to tariffs in our guidance range. That is a result of tariffs coming into place at the end of our last fiscal year, tariffs being in the full year effect of this fiscal year and then tariffs going above 10%. And there's very much a timing impact.

So should we receive relief from whatever the definition of relief is on green coffee, we would come back and have to revise the impact of the $0.50 for the fiscal year just due to the fact we're realizing it now and timing associated with it. And then secondly is we could also at that time then provide an update as it relates to how that would transition into FY '27.

But the thing that I want to caution is, should you read of relief, you may not add back the $0.50 to the full fiscal year because of the realization and timing factors that we're experiencing to-date.

We have reached end of our question-and-answer session. I'd like to turn the floor back for any further closing comments.

Well, first of all, thank you, everyone, for your time and for joining the call this morning. Our first quarter results demonstrate our strategy is working, and we continue to take actions to position the company for long-term growth and manage the things that we truly can control and react to those which may be out of our control in a positive fashion. This includes making strategic investments in the business launching consumer-led innovation and continuing to shift our portfolio to growth.

And as always, I would like to thank our outstanding employees for their continued hard work and dedication to our company. We hope that many of you will be able to join us in Boston at the Barclays Global Consumer Staples Conference next week. A live webcast of our presentation is on September 2, at 12:45 p.m. Eastern and can also be accessed from our Investor Relations Website. Thank you.

Thank you. That does conclude today's teleconference webcast. You may disconnect.

Good morning. This is Crystal Beiting, Vice President, Investor Relations and Financial Planning and Analysis for the J. M. Smucker Company. Thank you for listening to our prepared remarks on our fiscal 2026 first quarter earnings call. After this brief introduction, Mark Smucker, Chief Executive Officer and Chair of the Board, will provide a business and strategy update. Tucker Marshall, Chief Financial Officer, will then provide a detailed analysis of the financial results and our updated fiscal 2026 outlook.

Later this morning, we will hold a separate live question-and-answer webcast. During today's discussion, we will make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties.

Additionally, please note, we will refer to non-GAAP financial measures management uses to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP financial measures in this morning's press release.

Today's press release, a supplementary slide deck summarizing the quarterly results, management's prepared remarks and the Q&A webcast can all be accessed on our Investor Relations website at jmsmucker.com. We invite all interested parties to join us at 9:00 a.m. Eastern Time today for a live question-and-answer session with management to further discuss our first quarter results and outlook for the full 2026 fiscal year. Please contact me if you have any additional questions after today's question-and-answer session. I will now turn the discussion over to Mark Smucker.

Thank you, Crystal, and good morning, everyone. Our first quarter result exceeded our expectations and reflect the continued momentum of the business. Strong top line growth was driven by consumer demand for our portfolio of leading brands and our bottom line results reflect disciplined cost management and execution. We demonstrated agility throughout the organization by successfully managing what we could control. And though the external environment continues to be dynamic, we remain focused on executing against our 3 strategic priorities: accelerating organic growth, embedding transformation in our every day and fostering a B bold mindset.

Let me walk through the actions we are taking for each of these. Our first priority is to accelerate organic growth, which we demonstrated in the first quarter. Total company comparable net sales increased 2%. And when excluding contract manufacturing sales related to the divested pet food brands, net sales increased 3% versus the prior year.

We continue to prioritize resources towards our largest growth opportunities in our key growth platforms, the Uncrustables, Café Bustelo, Milk-Bone, Meow Mix and Hostess Brands. I'll dive deeper into each of these. Starting with the Uncrustables brand, which grew net sales double digits at the total company level even as we lapped strong distribution gains in the prior year. Growth was driven by our national advertising campaign, distribution gains and innovation. Our investments in marketing showed a strong ROI and the brand continues to infuse itself throughout pop culture and social media. Consumers themselves are helping us propel the brand into a mainstream phenomenon. The #1 SKU in the total frozen category is an Uncrustables Sandwich with 2 SKUs in the top 10.

The Uncrustables brand is leading the entire frozen category in attracting new buyers for households with kids, millennials and Gen Z. From a distribution perspective, we continue to gain traditional freezer space, and we are making strong progress on our expansion into the convenience channel. Uncrustables Sandwiches are now selling in over 30,000 convenience stores and more than 2/3 of the top 100 chains are either selling Uncrustables sandwiches or have committed to distribution.

We are also seeing the benefits of accelerating our innovation efforts. The Uncrustables peanut butter and Raspberry spread sandwich, which we launched last year is quickly becoming one of our top-selling SKUs for the brand. We also recently launched a new Berry Burst variety for the summer as part of our limited edition flavors and are excited to launch a new PB Choco Craze variety this fall. This regular cadence of limited edition flavors continues to bring excitement into the brand experience and is highly incremental to sales. We will continue to bring consumer-led innovation to market, including new nutritional profiles to meet varying desires like higher protein. We look forward to sharing more information soon on our next innovation.

Our proven brand-building model continues to drive strong results. And through these actions, we are well on our way for the Uncrustables brand to generate over $1 billion in net sales by the end of this fiscal year as it continues on its path of strong double-digit growth for the 12th consecutive year.

Our next key growth platform, the Café Bustelo brand continues to benefit from our brand-building efforts, maintaining strong momentum as one of the fastest-growing brands in the at-home coffee category. The Café Bustelo brand grew net sales by 36% in our U.S. retail coffee portfolio, inclusive of a 17% increase in volume mix. We increased marketing investments for the Café Bustelo brand this year to fuel the brand's tremendous momentum through a national marketing campaign as we aim to increase brand awareness and household penetration, both of which have significant runway for continued growth. We also launched new roast profiles in both prepack and cup formats. These new products have received strong retailer acceptance that exceeded our initial expectations and will help drive another year of anticipated double-digit net sales growth for Café Bustelo. Shifting to our key growth drivers in pet, the Milk-Bone and Meow Mix brands.

For the Milk-Bone brand, net sales declined as we lapped distribution gains from our highly successful Milk-Bone peanut butter Bites innovation in the prior year and consumers continue to be cautious in their spending. Overall, household penetration for the brand continues to increase, reinforcing its strong leadership position in the dog snacks category.

Pet parents continue to treat their pets, but treating frequency has moderated due to the discretionary nature of the category. We are focused on growing the Milk-Bone brand through a combination of marketing, innovation and targeted merchandising investments. We continue to anticipate the Milk-Bone brand will return to net sales growth in the back half of the fiscal year. In cat food, the Meow Mix brand continued its momentum with an increase in volume mix in the quarter.

We saw strong distribution gains for our dry cat food business in the latest 13-week period with total points of distribution increasing by a double-digit percentage. And our innovation, Meow Mix Gravy Bursts reinforces our ability to bring meaningful innovation to categories that have seen little disruption in the past. We also continue to refresh and invest behind our multiyear Meow Mix brand remix campaign and are focused on capturing new pet parents as the cat category is experiencing strong tailwinds from pet population growth.

For the Hostess Brand, we continue to take decisive actions to stabilize the brand by strengthening the portfolio and elevating our execution in the near term. As we position the brand for sustainable growth over time. Actions that we are taking include SKU optimization, where we are reducing our SKU count by 25%, which will largely be completed in our second quarter. This targeted action will improve velocities and deliver margin expansion as we prioritize high velocity, margin-accretive SKUs that better serve our consumers and drive increased operational efficiencies. We are also closing the Indianapolis manufacturing facility, which will deliver significant cost savings that will begin in our fourth quarter.

These activities will contribute $10 million of cost savings in the fourth quarter of this fiscal year and $30 million on an annualized run rate basis. We created a dedicated Sweet Baked Snacks sales organization to enable greater focus to elevate our execution. And we continue to apply our proven brand-building model to the Hostess Brand through culturally relevant marketing, refreshed packaging and consumer-led innovation.

Early signs reinforce that our strategy is working as base velocities are improving, and we have returned to share growth at several key customers. As we look to the future and towards reigniting sustainable growth, we are focused on the unique areas of strength for the Hostess Brand. Hostess remains an iconic brand with strong awareness, category-leading household penetration and beloved products with the #1 brand of packaged doughnuts in the category with donoughutts.

The #1 cup cake in the category and a leading snack cakes brand in Twinkies. Turning to our second strategic priority, embedding transformation in our every day. In the quarter, our transformation office delivered cost and productivity benefits, which include synergies from the Hostess Brands acquisition. This capability continues to deliver meaningful cost savings to enable delivery of our financial goals and reinvest into our growing brands. We have now achieved our goal of $100 million in total run rate synergies. Our transformation, cost discipline and cash generation objectives will enable our ambition to generate over $1 billion in free cash flow annually.

And finally, turning to our third strategic priority, fostering a B bold mindset to accelerate our pace of change, enabling greater speed and agility across the organization. This includes continuing to evolve our brands to meet the needs and evolving preferences of today's consumer and reaching new audiences through our world-class marketing, commercial and manufacturing capabilities, which fuel growth across our portfolio.

Now let me discuss how our execution against our strategic priorities drove our first quarter results in more detail. Turning to the dynamics in our U.S. Retail segments. In coffee, net sales increased 15%. Our portfolio is performing well as we navigate record high green coffee costs and continue to demonstrate our ability to recover increased commodity costs through responsible pricing. In the quarter, we continued to lap price increases from June and October of the prior fiscal year and have seen continued inflation in green coffee. Due to higher green coffee costs and the pass-through nature of the coffee category, we took a price increase in May. Since then, price elasticity of demand trends have been favorable to our initial expectations, demonstrating the strength of our portfolio and the resilience of the at-home coffee category.

Given these trends, we have updated our guidance to reflect better than historical price elasticity of demand assumptions for these price increases. As we continue to navigate a highly inflationary environment with the green coffee commodity, we took another price increase in August, which is now beginning to show up on shelf. We have forecasted a historical price elasticity of demand impact for this increase in our guidance.

Through the combination of the May and August pricing actions, we expected to recover our anticipated cost for the fiscal year when contemplating the impact from U.S. tariffs at the time. We now anticipate a higher U.S. tariff impact on green coffee costs, and we are working to mitigate these cost increases through a combination of alternative sourcing strategies, supply chain optimization and responsible pricing.

Embedded in our updated guidance range are our assumptions related to the impacts from tariffs in the current environment. We expect the coffee category to remain resilient despite recent inflationary pressures, given consumers' love of daily coffee rituals and continued strength in at-home consumption. Approximately 70% of all coffee drinking occasions continue to be at home. Our portfolio provides an affordable price per serving as an alternative to other beverage experiences such as the coffee shop, among others. We continue to anticipate the commodity will normalize over time as it has historically.

In Frozen Handheld and Spreads, net sales declined 2%. Results in the quarter tracked behind measured retail dollar sales driven primarily by 2 elements: First, for the Uncrustables brand, we are lapping strong distribution gains in the first quarter of the prior year and continued our merchandising investments to drive trial and awareness. We continue to expect double-digit net sales growth for the fiscal year.

Next, the Jif brand is lapping the strong launch of our Jif peanut butter and chocolate flavored spread innovation in the prior year and experienced a shift in promotional spending timing in the quarter. We anticipate net sales growth in the frozen handheld and spread segment to accelerate for the remainder of the fiscal year. In Pet Foods, net sales decreased 8%, reflecting a decline for dog snacks and a reduction in contract manufacturing sales related to the divested pet food brands. Overall, the dog snacks category has rebounded in recent periods, providing a positive outlook for our portfolio.

And in cat food, we continue to see strong momentum. Dog snacks and cat food remain attractive categories as pet population trends continue to be positive and are expected to grow over the long term. The humanization of the category continues to accelerate, leading to premiumization opportunities. And e-commerce trends are demonstrating strong momentum, a channel that performs well within our portfolio and is aligned with evolving consumer preferences.

With these positive category tailwinds and the strength of our leading brands, we remain confident in the long-term growth outlook for our pet portfolio. In Sweet Baked Snacks, comparable net sales decreased 10%, primarily driven by a decrease in snack cakes. Overall, we continue to see the sweet baked goods category trend in a positive direction, though still pressured from the discretionary nature of the category as consumers remain selective in their spending. And the health of the convenience store channel continues to improve through increasing traffic trends, which largely benefits the Hostess Brand as a top 5 snacking brand in the channel. Hostess Donettes is also a bright spot and has outperformed our broader portfolio. We experienced both increased dollar sales and volume growth over the last 13-week period.

Hostess Donettes is 3x larger than our next sub-brand and consumers view breakfast products as less discretionary than the broader sweet baked goods category. While more work remains to be done, we note sequential improvement in quarterly net sales year-over-year performance and absolute dollar profit in the Sweet Baked Snacks segment compared to the previous quarter.

Finally, in International and Away From Home, comparable net sales grew 7%. Growth was driven by the Away from Home business, which grew net sales double digits in the quarter. Our Away from Home business has seen tremendous growth as we continue to leverage our leading national brands and key growth platforms in Away From Home channels. Approximately 75% of our business is front of house, which benefits the company in 2 ways. First, our foodservice customers want products that our end consumers desire in their everyday lives, making us an attractive partner for them with our large portfolio of leading brands. And second, our model drives trial and awareness for our brands. We remain excited for the future growth opportunities in these channels across our brands in our Away from Home business and anticipate strong double-digit growth as the business grows to approximately 10% of total company net sales this fiscal year.

With the momentum for our brands continuing into our first quarter, we are revising our full year net sales expectations, primarily due to the strength of our coffee portfolio. Net sales are now anticipated to increase 3% to 5%, an increase of 1% at the midpoint of our guidance range or approximately $90 million. Comparable net sales are expected to increase 5.5% at the midpoint of the guidance range. Given the external environment, we are maintaining our adjusted earnings per share guidance range of $8.50 to $9.50.

The increase in our net sales guidance will be offset by what we anticipate will be a higher impact from U.S. tariffs. Which we now expect to be a $0.50 headwind to fiscal year 2026, which is an increase of $0.25 versus our original guidance. Green coffee remains our largest exposure and is an unavailable natural resource that cannot be grown to scale in the U.S. due to its reliance on a tropical climate. In closing, while we expect the external environment to remain dynamic, we continue to focus on managing the elements we can control and on taking actions that position the company for long-term growth.

This includes making strategic investments in the business, launching consumer-led innovation and continuing to shift our portfolio to growth. We remain confident in our strategy and our ability to deliver long-term growth and increase shareholder value. Before I close, I would like to extend my appreciation to all of our employees for their unwavering focus, dedication and outstanding contributions. With that, I'll turn it over to Tucker for additional insight on our financials and fiscal 2026 outlook.

Thank you, Mark. Good morning, everyone. I'll begin by giving an overview of our first quarter results, then I'll provide additional details on our financial outlook for fiscal year 2026. In the quarter net sales decreased 1%. Comparable net sales increased 2%, which excludes prior year sales related to the divested businesses and foreign currency exchange. Comparable net sales includes a $10 million headwind from lower contract manufacturing sales related to the divested pet food brands.

The increase in comparable net sales reflects a 6 percentage point increase from net price realization, primarily driven by higher net pricing for coffee, partially offset by lower net pricing for peanut butter. Comparable net sales also reflects a 4 percentage point decrease from volume mix. This reflects decreases for coffee, dog snacks, sweet baked goods, fruit spreads and lower contract manufacturing sales related to the divested pet food brands, partially offset by an increase for Uncrustables sandwiches.

In the quarter, comparable net sales exceeded our expectations, primarily driven by better-than-anticipated price elasticity of demand in our U.S. retail coffee portfolio and continued momentum in our Away from Home business. Adjusted gross profit decreased $89 million or 11% compared to the prior year.

The decrease reflects higher commodity costs, unfavorable volume mix and the non-comparable impact of divestitures, partially offset by higher net price realization. Adjusted operating income decreased $78 million or 17%, reflecting the reduction in gross profit, partially offset by lower SG&A expenses. The decrease in SG&A expenses was driven by reduced preproduction expenses related to the new Uncrustables Sandwiches manufacturing facility and was partially offset by increased investments in marketing.

Below operating income, net interest expense was comparable to the prior year as the impact of reduced debt outstanding was offset by higher overall interest rates. The adjusted effective income tax rate was 24.2% compared to 24.6% in the prior year. Factoring in all these considerations, along with weighted average shares outstanding of 106.8 million, first quarter adjusted earnings per share was $1.90, a decrease of 22% versus the prior year.

Adjusted earnings per share exceeded our expectations in the quarter, driven by better-than-anticipated net sales and favorable timing of SD&A expenses. Turning to our segment results. In the U.S. Retail Coffee segment, net sales increased 15% versus the prior year.

Net price realization increased net sales by 18 percentage points, reflecting higher net pricing across the portfolio to recover increased commodity costs. Volume mix decreased net sales by 2 percentage points, reflecting decreases for the Dunkin and Folgers brands, partially offset by an increase for the Café Bustelo brand. Price elasticity of demand trends continue to be favorable to our expectations in the first quarter.

U.S. Retail Coffee segment profit decreased 22%, primarily reflecting higher commodity costs, unfavorable volume mix and increased marketing investments, partially offset by higher net price realization. In U.S. retail frozen handheld and spreads, net sales decreased 2%. Volume/mix decreased net sales by 2 percentage points, driven by decreases for peanut butter and fruit spreads, partially offset by an increase for Uncrustables sandwiches.

Net price realization decreased net sales by 1 percentage point, reflecting higher trade spend for peanut butter, partially offset by higher net pricing for Uncrustables Sandwiches due to a list price increase implemented in the quarter. U.S. Retail Frozen Handheld and Spreads segment profit decreased 4%, driven by increased marketing investments and unfavorable volume mix, partially offset by lower preproduction expenses primarily related to the new Uncrustables Sandwiches manufacturing facility. In U.S. Retail Pet Foods, net sales decreased 8% versus the prior year. Volume/mix decreased net sales by 8 percentage points, driven by a decrease for dog snacks and lower contract manufacturing sales related to the divested pet food brands.

Net price realization for the segment was neutral to net sales in the quarter. U.S. Retail Pet Food segment profit decreased 12%, reflecting unfavorable volume mix and higher costs, partially offset by lower marketing spend. In the Sweet Baked Snacks segment, net sales decreased 24%. Excluding noncomparable net sales in the prior year related to divested Voortman business and certain Sweet Baked Snacks value brands, net sales decreased 10%.

Volume mix decreased net sales by 8 percentage points, primarily reflecting a decrease for snack cakes. Net price realization decreased net sales by 2 percentage points, primarily reflecting lower net pricing for snack cakes. Segment profit decreased 54%, reflecting the impact of the noncomparable segment profit in the prior year related to the divested businesses, unfavorable volume mix and higher costs.

Lastly, in International and Away from Home, net sales increased 7%. The impact from foreign currency exchange was minimal in the quarter. Net price realization contributed a 9 percentage point increase to net sales, driven by higher net pricing for coffee and portion control products. Volume/ mix decreased net sales by 2 percentage points, primarily driven by decreases for coffee and fruit spreads, partially offset by an increase for Uncrustables Sandwiches.

Net sales for the Away from Home business increased 14% on a comparable basis, driven by coffee and Uncrustables Sandwiches. Net sales for the International business decreased 6% on a comparable basis, primarily reflecting a decrease for our coffee portfolio. International Away from Home segment profit increased 35%, reflecting higher net price realization and lower SD&A expenses, partially offset by higher costs.

First quarter free cash flow was negative $94.9 million compared to $49.2 million in the prior year, reflecting the decrease in cash provided by operating activities, partially offset by a decrease in capital expenditures as compared to the prior year. We finished the quarter with a cash and cash equivalent balance of $39 million and a total net debt balance of approximately $8 billion. Our trailing 12-month adjusted EBITDA is approximately $1.8 billion. Based on this, our leverage ratio currently stands at 4.3x. We plan on continuing to prioritize debt reduction by paying down approximately $500 million of debt in each of the next 2 fiscal years. With this anticipated deleveraging and overall business growth, we anticipate a leverage ratio of approximately 3x net debt to EBITDA by the end of fiscal year 2027.

This level of debt provides the financial flexibility for a balanced approach to capital deployment. Let me now provide an update on our outlook for fiscal year 2026. We continue to operate in a dynamic and evolving external environment, including tariffs and related trade impacts, regulatory and policy changes, ongoing input inflation and changes in consumer behaviors that could impact our fiscal year 2026 outlook.

This guidance reflects the company's expectations based on its current understanding of these factors. We are pleased to increase our full year net sales expectation by 1 percentage point at the midpoint of our guidance range and now anticipate full year net sales to increase 3% to 5% compared to the prior year.

This guidance reflects a $135 million headwind from the lapping sales of the divested Voortman business and certain Sweet Baked Snacks value brands and a $38 million impact from reduced contract manufacturing sales related to the divested pet food brands as the arrangement was exited last fiscal year. Comparable net sales are now anticipated to increase approximately 5.5% at the midpoint, which includes the unfavorable impact of the reduced contract manufacturing sales related to the divested pet food brands.

This growth reflects higher net price realization, primarily due to pricing actions across our coffee portfolio in response to higher grain coffee costs. The increase in comparable net sales reflects Volume/mix growth for the Uncrustables, Meow Mix and Café Bustelo brands and the Away from Home business versus the prior year. The increase in our net sales guidance reflects the following changes from our previous expectations.

We delivered results that exceeded our expectations in the first quarter, primarily in U.S. Retail Coffee and our Away from Home businesses. We also anticipate higher net sales in U.S. Retail Coffee for the fiscal year, reflecting improved price elasticity of demand assumptions contemplated in our guidance. We now expect a higher U.S. tariff impact on green coffee costs, and we are working to mitigate the cost increase through a combination of alternative sourcing strategies, supply chain optimization and responsible pricing. And we reduced net sales expectations for our dog snacks portfolio, primarily in the Pepperoni and Canine Carry Outs brands.

We now anticipate full year adjusted gross profit margin of approximately 35% to 35.5%. This reflects our outlook for higher U.S. tariff impact on green coffee costs than originally contemplated. We continue to anticipate SG&A expenses to increase by approximately 3% in fiscal 2026, primarily reflecting increased marketing investments in the Café Bustelo and Uncrustables brands.

Total marketing expense is estimated to be approximately 5.7% of net sales. We anticipate net interest expense of approximately $380 million and an adjusted effective income tax rate of 23.8%, along with a full year weighted average share count of 106.9 million. Taking all these factors into consideration, we are maintaining our full year adjusted earnings per share guidance range of $8.50 to $9.50. Our expected guidance range includes the following updated impacts: A $0.60 unfavorable net impact from our updated price elasticity of demand assumptions in the U.S. Retail Coffee segment, a $0.20 improvement from previous expectations. And a $0.50 unfavorable net impact from tariffs, which reflects a $0.25 increase from previous expectations driven by increased U.S. tariff rates, primarily impacting our grain coffee costs.

We are increasing our free cash flow projection by $100 million to approximately $975 million, which reflects a $100 million benefit to free cash flow for the fiscal year, driven by accelerated research and development and bonus depreciation tax deductions enabled by the One Big Beautiful Bill Act. We continue to anticipate capital expenditures of $325 million for the year. Other key assumptions affecting free cash flow include depreciation expense of approximately $350 million, amortization expense of approximately $200 million, share-based compensation expense of $35 million and other non-cash charges of $110 million.

In the second quarter of the fiscal year, net sales is anticipated to increase low single digits, which incorporates an impact of $50 million related to the divested Voortman business and certain Sweet Baked snacks value brands. Comparable net sales is anticipated to increase mid-single digits, reflecting an increase in net price realization, partially offset by unfavorable volume mix. Net sales also reflects a decline of $15 million of contract manufacturing sales related to the divested pet food brands. Adjusted earnings per share is expected to decline approximately 25%, primarily driven by a decrease in adjusted gross profit in U.S. Retail Coffee. Increased marketing investments of $25 million versus the prior year and the noncomparable impact of divestitures.

Our second quarter adjusted earnings per share expectations are lower than originally anticipated, driven by the timing between our realized green coffee hedges and physical green coffee inventory received. We anticipate adjusted earnings per share will improve sequentially throughout the fiscal year, building momentum and setting us up for an algorithm year or potentially better in fiscal year 2027, absent any significant changes in the green coffee commodity market and consumer or regulatory environment, inclusive of trade policy.

In closing, we are committed to maintaining a disciplined and responsible financial approach while strategically investing in our key platforms and executing on our priorities to deliver long-term growth and increase shareholder value.

Additionally, I would like to thank our employees for their commitment to executing with excellence and their passion for our company positions us for continued success. Thank you.

Good morning, and welcome to the J.M. Smucker Company's Fiscal 2025 Fourth Quarter Earnings Question-and-Answer session. This conference call is being recorded. [Operator Instructions].

I'll now turn the conference call over to Crystal Beiting, Vice President, Investor Relations and Financial Planning and Analysis. Thank you. You may begin.

Good morning, and thank you for joining our fiscal 2025 fourth quarter earnings question-and-answer session. I hope everyone had a chance to review our results as detailed in this morning's press release and management's prepared remarks, which are available on our corporate website at jmsmucker.com. We will also post an audio replay of this call at the conclusion of this morning's Q&A session.

During today's call, we may make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, we use non-GAAP results to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning's press release.

Participating on this call are Mark Smucker, Chief Executive Officer and Chair of the Board; and Tucker Marshall, Chief Financial Officer.

We will now open the call for questions. Operator, please queue up the first question.

[Operator Instructions]. Our first question is coming from Andrew Lazar from Barclays.

Mark, I think at CAGNY, you and Tucker mentioned that the company could have delivered an above algorithm EPS growth year in fiscal '26 if it were not for higher green coffee costs. If we exclude the $0.80 impact from coffee inflation and pricing and also the $0.25 impact from tariff, I guess EPS is still expected to be lower year-over-year at the midpoint.

So I guess I'm curious what has changed since then and sort of what drives this new more subdued outlook? And I guess, would you consider this new EPS base as sort of derisked, so to speak?

Andrew, this is Tucker. You are correct. If you take the midpoint of our guidance range of $9 on an adjusted earnings per share basis, and you add back the $0.25 impact of tariffs, which is new news from CAGNY, along with the outlook for price elasticity of demand associated with green coffee inflation of $0.80, you'd be in the low $10.

And really what has changed is a couple of things. One, the importance of ongoing marketing investment to support our key growth platforms, specifically around Café Bustelo and Uncrustables. That is a $0.30 investment. And then also the new news as it relates to the performance within our Sweet Baked Snack segment, where segment profit will be down on a comparable basis, which is about another $0.20 impact, and that would put you well over $0.50.

And then I would just acknowledge that in this environment, we do find it important to provide guidance, both the top line and bottom line. But we also think it's prudent that we take a very cautious approach and make sure that we have a wide range to not only reflect where we see our financial plan or outlook for the year, but also to be balanced on both sides.

Great. And then I realize coffee elasticity thus far has come in a bit better than planned. I think you had been planning for maybe higher than, let's call it, historical elasticity going forward, just given the magnitude of incremental pricing that is still to come. And I think in your prepared remarks, you talked about historical levels of elasticity. So I guess my question is, why not take a more prudent view on coffee elasticity just in light of all the pricing coming through?

Yes, Andrew, it's a great question. And we do believe, overall, we are being prudent and balanced in our outlook, particularly with respect to our coffee portfolio. And if you think about our outlook for the year, we have just around 20% net pricing factored into our FY '26 outlook, against around a negative 10% volume impact due to that price elasticity of demand factor.

And on average, that is an elasticity of 0.5, which is consistent with historical. But I would say that's on average over a fiscal year, and that's on average across the portfolio. In our first quarter, we will experience a greater elasticity factor as a result of taking pricing in our first quarter and early second quarter.

And then secondly, also acknowledging that our first quarter will also have its most negative cost price outlook as we match the timing of pricing against the ultimate cost for the first quarter.

Next question today is coming from Ken Goldman from JPMorgan.

I wanted to ask a little bit about Hostess, in particular, the SKU and display rationalizations that you highlighted. I'm just hoping for a little bit more color, if possible, on kind of the size, the impact, basically, which products, which channels might be affected? Kind of any detail you can provide, so we can kind of get a little bit of a better vision of what to expect for the broader brand.

Thanks, Ken. It's Mark. I can't give you specifics on brands and products, but the way I would couch it is that we need to focus on the largest brands and related innovation in those brands. So think Donettes and cupcakes primarily because both of those are #1 in their respective segments.

Twinkies is, of course, important. But if you think about Donettes, Donettes has performed reasonably well. particularly because it's a breakfast occasion. You've seen a number of innovations that have come out around Donettes that are related.

So we really need to make sure that we are focused on the platforms that are really going to drive growth, and it's really those core brands. So we're going to invest behind those core products like Donettes and cupcakes, among others.

And then I would just maybe highlight as well. If you think about the clarity, we have a tremendous amount of clarity now on this business, and we know what we need to do to drive improvement and if I could just very quickly simplify the 3 pillars, you already hit on it, strengthen the portfolio, and that's around optimizing the portfolio and getting more focused.

The second thing is elevating execution, and that's very simply around a dedicated sales force and streamlined operations by closing and consolidating the Indianapolis facility that will improve profit over time.

And then the last thing is quite simply brand building. and that's around reigniting growth, investing in the brands. Obviously, we redesigned the packaging recently, but it's really about supporting these brands and being laser-focused on what we have to go do.

Okay. And then just a quick follow-up on that. I know the -- we don't want to relitigate the past in a way. But one of the stories on Hostess, when it was a stand-alone company was the excitement of new products, the fulfillment of the opportunity of getting displays in stores where it didn't previously have it.

Just philosophically, we're taking a step back, is it possible that the brand went a little too far in terms of lateral products or going into stores or channels where maybe it didn't have the right to win. I just wanted to get a little bit of a better sense for how you think the brand stands now in terms of kind of where "should be playing."

Sure. So first of all, just taking maybe a quick step back, snacking is still very important. If you think about consumers like 70% of consumers still consume 2 snacks a day. Hostess plays across multiple occasions, right? I just mentioned the breakfast occasion, but of course, they are different dayparts.

And so we fundamentally believe that sweet snacks continue to be a very important category. And although we do view that it's going to take some time to obviously stabilize the brand and get it back to growth. We still are optimistic about our progress and the actions that we are taking.

So I guess the short answer to your question, Ken, is focus. And so there is a need for us to just to continue to focus on those components of the portfolio where we can drive growth and incremental innovation that is related to the core.

Next question is coming from Peter Galbo from Bank of America.

Tucker, I just wanted to clarify maybe one of the points you made on pricing for the year. So I think you said about 20 points or so to the coffee segment, and I think your guidance implies or has 9 points to the total company.

So just wanted to understand the magnitude of the other price increases that you called out for the year, particularly around Uncrustables and then maybe also -- I think there's a pretty sizable coffee business in international Away From Home. So any clarity there would be helpful.

Yes. So the largest driver of pricing within that 9% relates to our green coffee portfolio, as we've communicated. The other pricing action in Frozen Handheld and Spreads around the Uncrustables brand to recover increased cost is in the low single digits.

Okay. Got it. And so the balance, again, comes through that Away-From-Home business that has coffee in it, just to be really clear.

Yes, that's correct. That's going to feel more like high single digits. You're correct.

Okay. Okay. Terrific. And then, Mark, on Hostess and the revised long-term outlook, I mean, I guess the pushback or the question we're still getting this morning is, look, you moved the long-term growth rate from 4% to 3%. Obviously, the near-term data still has a pretty wide gap to that. So just what gives you the confidence that the renewed kind of long-term outlook is conservative enough relative to the expectations, just given what we continue to see kind of in the near-term data?

Yes. Peter, I would begin by just saying the change in the long-term growth algorithm at top line for the Sweet Baked Snacks portfolio from 4% to 3% is primarily driven by the outlook for the category and our need just to acknowledge that it may not grow at that mid-single-digit level that it has in the past.

And it's also a reflection of how we continue to see the overall stabilization plan, inclusive of reigniting growth and making sure that we stay true to the Hostess brand, strengthen the core and bring along the innovation that supports the core.

Next question is coming from Chris Carey from Wells Fargo Securities.

I was just curious maybe if you could expand a bit on where you're going to be pricing in the coffee portfolio. Obviously, it's a big number. Should we be assuming that the entire portfolio will be seeing this pricing? Is this going to focus more on the roast and ground side given that you have the higher direct commodity exposure? So any additional context on how big pricing will be relative to your specific businesses within coffee?

Yes. So we are taking pricing across the entire coffee portfolio. That's reflected in the around 20% net pricing for the full fiscal year. Those actions came early Q1 and will also come in early Q2. And those actions not only cover green coffee commodity inflation, but also support recovering tariffs associated with our green coffee.

Okay. That makes sense. In the prepared remarks, you mentioned an improvement in Sweet Baked into the back half of the year as you implement some of these initiatives to stabilize the business. Can you just help us understand why that cadence gets so much better into the back half? Are you contemplating easier comps? Is there some innovation? Is there a lessening of any rationalization efforts that you're putting in? So just maybe some context on the sequential improvement that you're expecting in that business through the year per your prepared remarks.

Yes. So we see the Sweet Baked Snacks portfolio improving over time as a result of our stabilization efforts that are focused first on stabilizing share performance and improving share performance; and two, improving the profitability by quarter of the overall business and the profitability improved by actions that we're taking. One example of that is the closure of the Indianapolis facility, along with looking at the overall portfolio as well of products. And so that's really why it gives us confidence. And then to your point, we will be lapping some comps as we move forward as well.

Next question is coming from Robert Moskow from TD Cowen.

A couple of questions. The first on coffee, just looking at retail tracking data for the month of May, the volume is up according to Nielsen data anyway. So my first question is, do you expect some kind of reversal in that in June and July because so far, so good in terms of consumers reacting to your higher pricing according to the data anyway.

Yes, Rob, it's Mark. The first thing I would say is we're really pleased with our performance on coffee across the portfolio broadly. I mean, Dunkin' -- or Dunkin', pardon me, Bustelo is on fire. And Folgers has performed reasonably well as well. Dunkin', we've actually seen some stabilization along with K-Cups due to more normalized relative price points.

So a couple of observations. First of all, the category is functioning as it should, right, in terms of relative pricing being in line. And the other thing, too, is just coffee is still relatively affordable. And obviously, folks are still consuming caffeinated beverages. And coffee on average, brewed coffee is still about 10% -- $0.10 a cup, right? So it's extremely affordable.

And we believe that the combination of affordability the fact that our portfolio meets multiple consumer needs, whether that's value, premium, form, liquid, et cetera, and the fact that consumers continue to consume coffee at the same rates, about 70% of cups are consumed at home.

All of those factors supported by our brand building efforts and particularly the growth of Bustelo continue to give us confidence that we can and should continue to perform in the category.

Okay. Well, here's the follow-up. In the transcript, it says that you experienced elevated trade recognition in Sweet Baked Snacks and it was unexpected. Can you give a little more detail as to why it was unexpected. I would think that -- I think what happens is you accrue for trade expenses during the year and then you kind of level them out in the last fourth -- in the fourth quarter? Or it did play out differently than that?

Yes. Rob, as it relates to the Sweet Baked Snacks trade recognition. It just really came a part of our year-end trade accrual recognition process. And also, I would just acknowledge that we did go live in the fall onto a combined system. And so also as a result of that, there was some extra true-up activity in the new system as well.

Our next question is coming from Tom Palmer from Citi.

Maybe I could just start quickly on Hostess as well. At the Investor Day, you talked about how a big focus was going to be expanded distribution for Hostess. And you would have a better idea of kind of how that went in another quarter or 2. So we're kind of, I think, up to that point. Based on some of the comments today, it sounds like maybe that's not as big of a growth driver as it might have potentially seen, but just any update on what you're seeing on the distribution side, especially for some of the innovation that you've previously discussed?

Tom, it's Mark. Yes, we have seen good progress on that front, particularly with some of our larger traditional retailers. We actually have seen, as they've started to reset shelves, we are getting our fair share and actually building in things like permanent seasonal space on shelves that allow for us to actually rotate seasonal products in and out of permanent shelving. That's on top of getting some incremental display. So that will continue to help support the business going forward. And to the extent that we see some consumer stabilization that is supportive of the convenience channel that will also support as well.

Okay. And then wanted to ask on the tariff side. Beyond green coffee, could you give an update on your main tariff exposure and how you plan to address it? And that $0.25 net headwind, does that include coffee? Or when you talk about coffee inflation, that's just kind of embedded in more of the coffee commentary?

Tom, there's 2 parts to your question. So let me start with the first part. The areas where we see exposure from tariffs are, first of all, in direct materials. Within direct materials, the primary driver there is green coffee, which we view as an unavailable natural resource in the United States. So we procure from Brazil and Vietnam, among others.

The second area is retaliatory tariffs. And so those are products that we produce in the United States and sell in the Canadian marketplace. Examples of that would be peanut butter, ice cream toppings and also coffee as well.

And then you can also think of the next component of co-manufactured product. That's product that is produced outside of the United States, and the 2 examples there are liquid coffee and wet cat food. And then the last bucket is capital goods or capital items that we put in our manufacturing plants as well that come largely from the European Union.

The greatest exposure that we have in the portfolio is across those first 3 areas, but the leading driver is green coffee. The approach will be to price for the tariff and then to factor in an elasticity of demand assumption and the $0.25 impact is the net impact after making a pricing decision, again, on a responsible basis and/or seeking to find cost and productivity efforts as well, but then just acknowledging that we will have to take pricing and then making an assumption as it relates to price elasticity of demand as noted. So that's what's embedded in the net $0.25 impact. And I would also share that the net $0.25 impact predominantly over-indexes to coffee.

Next question is coming from Megan Clapp from Morgan Stanley.

Maybe just a couple of follow-ups for me. So first one would be a follow-up to Andy's first question. At CAGNY, I think you had talked about base business momentum or growth as a tailwind to 2026. You took out growth, if I'm not mistaken. And if we do the math on the bridge, laying out all of the things that you pointed out. I think at the midpoint of the guide, it would imply a very little benefit from the base business, maybe even negative. So 2-part question. Is that math kind of consistent with what you've embedded in the guide as it relates to the base business, maybe minimal growth? And second, if that is true, what's changed around the base business such that you no longer would expect growth in fiscal '26?

Meghan, as we came out of CAGNY, we acknowledged the midpoint of our guidance range, actually came out of our third quarter earnings call of about $10 for fiscal year '25. an above algorithm growth would be for us greater than $0.50. And so the simple math would say you'd probably land somewhere between $10.50 and the high $10 absent the factors that we have called out.

And if you think about those factors that we've called out, you have $0.80 associated with price elasticity of demand for green coffee. I don't know what estimates worth factoring in. Two is you also had a $0.25 impact of tariffs, which was new news. So that's in excess of $1.

And then we did acknowledge that it's important to demonstrate momentum from a brand standpoint. And so we're increasing our marketing on Café Bustelo and on Uncrustables. And then also Sweet Baked Snacks is softer than anticipated. And so maybe some of the things that weren't thought of at the time is just where Sweet Baked Snacks would be positioned. Two is some of these external factors that we've discussed. And then three, just an acknowledgment that we do see continued momentum in Frozen Handheld and Spreads.

We do see strength of portfolio in pet, largely driven by cat food right now as we navigate the discretionary nature of pet treating and then just seeing continued momentum in our combined portfolio of international and Away-from-Home. So hopefully, that just gives you some context about, a, coming out of CAGNY, but really where we stand today due to some of those external factors.

Okay. Fair enough. That's helpful. And then a follow-up to Rob's question earlier, just on 1Q. Maybe for the total company, you talked about flat comparable sales. Just looking at overall standard data quarter-to-date through May, it's pretty far above that. So is there something we should be thinking about relative to the standard data thats' pulling -- that should pull that down closer to flat in the first quarter?

Yes. So I think you have to acknowledge, one, flat in the first quarter, you will see some momentum in coffee and Frozen Handheld and Spreads at top line. Pet will have a little bit softness just due to the ongoing discretionary nature of pet treating. You will be lapping the impact of divestiture activity within the Sweet Baked Snacks portfolio, and you'll see continued momentum within International and Away-From-Home.

But on the bottom line, what I want to acknowledge is that we are going to see a decline year-over-year, as noted in our prepared remarks. And that is largely driven by the first quarter impact within our coffee portfolio. The segment profit margins in our coffee portfolio will be at their lowest level in Q1. They'll be below 20%, but they will come back on a full year basis on average to be in excess of 20%. And so it's just acknowledging the timing of pricing and the overall cost within the green coffee portfolio in Q1.

Next question is coming from Peter Grom from UBS.

Tucker, can we just walk through the SG&A guidance. You touched on the higher marketing investment, which I think was outlined for $40 million. But are there other components or costs that are also moving higher? It just would seem that after taking the higher marketing into account, there's not much of a benefit from some of the cost takeout that you outlined in the release.

Yes. So what we're seeing is some impact of lapping TSA income and also the reset of incentive programs would also be factored into SG&A, but we are seeing cost and productivity gains within SG&A, and we've isolated the marketing, as you've noted.

Great. And then maybe just a question or a follow-up on phasing, a tough start to the year as you just outlined to Megan's question from a bottom line perspective. But you mentioned sequential improvement through the balance of the year. Can you maybe just provide some guardrails in terms of how we should be thinking about the phasing? Did the decline just get less severe? Or do you anticipate returning to bottom line growth at some point in the balance of the year?

Sure. So speaking with respect to adjusted earnings per share sort of flow through the year, our lowest or softest quarter will be Q1 based on the comments that I previously made largely around our green coffee portfolio. We won't see a decline in the second quarter and third quarters as well, but those quarters will be consistent from an EPS standpoint and then we will see growth in our fourth quarter, as noted.

Our next question today is coming from Alexia Howard from Bernstein.

So 2 questions. First of all, you mentioned the pace of innovation beginning to pick up, and I think you talked about $100 million from products launched over the last year. How does that compare to pre-COVID levels, which I think were generally higher across the industry? And where do you expect them to get back to? And then I have a follow-up.

Alexia, it's Mark. Thanks for the question. $100 million is great. I mean it's definitely on the high side. We usually talk about historically innovation across products launched in the last 3 years. And in the last 3, it's more like 250 -- $250 million. So $100 million in 1 year is actually very strong. And it's really, again, driven by focusing on the right thing.

So if you -- whether it's peanut butter chocolate spread on Jif, whether it's new flavors on Uncrustables, liquid coffee on Bustelo, really strong performance on the innovation in both Meow Mix and Milk-Bone. All of those things we're doing very well. And I'm really proud of the fact that we continue to innovate in the right spaces because we're focused on the consumer and paying attention to what their needs are and what they want. And so our ability to continue to deliver that is key to our success.

And as a follow-up, just coming back to Hostess. I think you talked about the value-seeking behavior on the part of consumers and the weakness in the C-store channel has been the key drivers of category weakness. How do you factor in or how does your diagnosis extend into things like the uptake of GLP-1 drugs, RFK juniors Make America Healthy Again agenda, things like cutbacks in a state level [ SNAP ] spending approvals. It just feels as though there's a lot more drivers in there. And I'm curious about how that's leading you to manage the business differently.

Sure. It's a great question. We continue to believe and watch the trends on snacking as I mentioned earlier, snacking is still very important. Consumers are going to continue to snack and they will continue to snack, but looking for, in some cases, different things. It might be smaller portion sizes in some cases, might be less sugar.

And we just have to make sure that what we remain focused on is providing the consumer with choice and options. And so as we think about this and working with our policymakers and continuing to look at trends, as long as we stay focused on the consumer and making sure that our portfolio meets those needs, we feel confident that we will continue to grow.

Our next question today is coming from Steve Powers from Deutsche Bank.

First, I just wanted to test a bit your confidence in driving volume mix growth in both the Meow Mix and the Milk-Bone brands this year, just in light of current trends and in light of kind of the discretionary headwinds that Tucker had mentioned. So just kind of the building blocks to get back to positive on those brands would be great.

Sure. Meow Mix is supported by an increased cat population, right, and just great brand-building efforts and share of voice and good innovation. So I think the leading position in dry cat, we will be able to maintain that and support it through growth.

Similarly, on Milk-Bone, Steve, we are projecting getting Milk-Bone back to growth this year. It's really going to remain, again, brand building, focusing on innovation, ensuring that we're providing the consumer what they're looking for. And just Keep in mind on Milk-Bone that we play in so many segments and treating occasions and all the way from value base biscuits up to more premium things like dental. The soft and chewy segment has been very good. And as long as we continue to innovate in the right places and support the brand, we have a lot of confidence in Milk-Bone as well.

Steve, I would just acknowledge sort of 2 technical items. One, in the third quarter of our fiscal year '25, we had the plant shutdown associated with Milk-Bone. And then in the fourth quarter of our fiscal year '25, we also had the inventory destocking by certain retailers.

Yes. Okay. Understood. Appreciate that. And then, I guess, sort of a derivative question, you offered similar commentary in terms of positive volume growth on Bustelo, which Mark, you rightly said is on fire. I guess just in light of that confidence, I guess, just the elasticity that implies on the balance of the portfolio? Just it seems notably worse than that 0.5, you called out for the totality. So just a little bit more color and context there, if you could.

Yes. I think, Steve, really what that plays into is just on average, we have 0.5 elasticity across the portfolio for the full year. But when you have a brand like Café Bustelo that continues to demonstrate great momentum and growth, it just implies a little bit higher factor on other aspects of the portfolio, and that's why we get to an on average for the overall segment.

Your next question today is coming from Scott Marks from Jefferies.

I wanted to follow up on Steve's question on pet. I know you called out the inventory reduction at some retailers. Wondering if you can share maybe magnitude of impact there? And then if there's anything maybe more than just some of the discretionary spend headwinds that you noted?

Sure. So in the fourth quarter associated with the pet portfolio, it was around $20 million associated with the inventory destocking at certain retailers.

Got it. And was that specifically tied to kind of the just broader consumer pullback in some of that discretionary spend? Or is there maybe something else involved with that?

We believe that it was more retailer-specific or driven, not necessarily driven by the overall consumer because we still see strong momentum for our overall pet treating portfolio as well.

Got it. And then last one for me. There was a comment in the prepared remarks about anticipating fiscal '27 to be an on-algo growth year in terms of adjusted EPS. Just wondering if you can kind of share maybe some thoughts around that and how maybe you're setting up fiscal '26 to kind of -- to run into '27?

Sure. So I think there's a couple of things that we want to acknowledge here on today's call. Absent some external factors and some internal decisions, we would have probably been somewhere above $10.50 for this fiscal year. But when you factor in the impact of price elasticity demand on green coffee, marketing investments, the softness in Sweet Baked snacks and tariffs, the midpoint of our guidance range is $9.

I think what we're trying to acknowledge is, is that we don't anticipate these factors reoccurring again. So depending upon where we end this fiscal year, we would anticipate an algorithm growth for next fiscal year.

Our next question today is coming from Max Gumport from BNP Paribas.

I've got one on free cash flow, and there's 3 parts to it. I believe some of the answers could be related to each other. So first, you meaningfully missed the FY '25 guidance of $925 million with $817 million reported. What was the driver of that miss?

Second would be your FY '26 guidance of $875 million implies a large step-up year-over-year despite adjusted EPS being expected to meaningfully decline. So what's embedded in that assumption with regard to working capital and other tailwinds?

And then the third would be the $875 million FY '26 guidance, that doesn't cover the anticipated $500 million in debt paydown and then the $455 million plus dividend payment. So I presume there's a bit of cash you can call on. I know you have the $70 million balance, but what other measures are you expecting to use to fund those financing needs?

Max, so you are correct. We finished this fiscal year with $817 million of free cash flow, which was approximately $100 million below our expectations coming out of the third quarter. Simply, it's associated with green coffee inflation and our inventory balances were higher at year-end.

As it relates to next fiscal year, our outlook is $875 million. And what enables that improvement year-over-year is, first of all, our capital expenditures are anticipated to be $325 million, which is about $75 million lower than we finished this past fiscal year.

Further, we'll continue to manage working capital, and we'll continue to deliver earnings this fiscal year.

With respect to your question around debt paydown, yes, we will use a combination of cash generated from free cash flow after dividend payments, and we will also use excess cash on the balance sheet as well.

We reached the end of our question-and-answer session. I'd like to turn the floor back over for any further or closing comments.

Well, thank you all, and thank you for joining us this morning. As we shared, fiscal '25 was a year of significant progress as we delivered growth in a very challenging environment. Our results are a direct result of our focused strategy and the work we have done in recent years around portfolio optimization. We operate in very attractive categories with leading brands and offerings ranging from value to premium.

Looking ahead to fiscal '26, we remain focused on investing in our key growth platforms and executing on our strategic priorities. We have the right strategy and portfolio in place and are excited about our future growth opportunities largely through our key growth platforms.

In closing, I'd like to extend my sincere thanks to our employees for their exceptional work and dedication. I hope everyone has a great day. Thank you.

Good morning, this is Crystal Beiting, Vice President, Investor Relations and Financial Planning and Analysis for The J.M. Smucker Company. Thank you for listening to our prepared remarks on our fiscal 2025 fourth quarter earnings. After this brief introduction, Mark Smucker, Chief Executive Officer and Chair of the Board, will provide a business and strategy update. Tucker Marshall, Chief Financial Officer, will then provide a detailed analysis of the financial results and our fiscal 2026 outlook. Later this morning, we will hold a separate, live question-and-answer webcast.

During today’s discussion, we will make forward-looking statements that reflect our current expectations about future plans and performance. These statements rely on assumptions and estimates, and actual results may differ materially due to risks and uncertainties. Additionally, please note we will refer to non-GAAP financial measures management uses to evaluate performance internally. I encourage you to read the full disclosure concerning forward-looking statements and details on our non-GAAP measures in this morning's press release.

Today's press release, a supplementary slide deck, management's prepared remarks, and the Q&A webcast can all be accessed on our Investor Relations website at jmsmucker.com. We invite all interested parties to join us at 9:00 am Eastern Time today for a live question-and-answer session with management to further discuss our fourth quarter results and next year's outlook for fiscal year 2026.

I will now turn the discussion over to Mark Smucker.

Thank you, Crystal, and good morning, everyone. I will begin today's call with a summary of our full year performance and then provide highlights on our fourth quarter results. I will also share the strategic priorities that will enable us to achieve our fiscal 2026 guidance in what continues to be a dynamic operating environment while positioning the Company for future growth through investments to support our key platforms and strengthen our brands. Tucker will then provide additional details on our fourth quarter results and outlook for next fiscal year.

Fiscal year 2025 was a year of significant progress as we delivered positive results in a challenging environment. Our performance reflects top-line growth supported by strong consumer demand for our portfolio of leading brands, and bottom-line growth driven by disciplined cost management and execution. We demonstrated agility throughout the organization by successfully managing what we could control, and we navigated with excellence those factors beyond our control. As a result, the business remained resilient amidst macroeconomic pressures.

Our results in fiscal year 2025 reflect the success of our focused strategy and portfolio optimization, which has fundamentally transformed the company. Of note, we reignited innovation that is resonating with our consumers, with over $100 million in net sales coming from new products in their first year of launch, resulting in one of our most successful years of innovation in recent history. We launched Jif peanut butter and Chocolate Flavored Spread, new varieties of Uncrustables sandwiches, Café Bustelo multi-serve coffee and Milk-Bone peanut buttery bites, just to name a few, all of which are exceeding expectations.

Our investments in brand building continued to be effective and drove consumer demand, with brands growing or maintaining dollar share accounting for 74% of our measured retail dollar sales in the fourth quarter as we ended the fiscal year.

Our Transformation Office delivered cost and productivity benefits, including synergies from the Hostess Brands acquisition of approximately $75 million, which exceeded our original expectations. And we continued to prioritize resources to our largest growth opportunities in our key platforms, the Uncrustables, Café Bustelo, Meow Mix, Milk-Bone and Hostess brands. I'll dive deeper into each of these.

Starting with the Uncrustables brand, which continued its strong momentum throughout the year including realizing its 11th consecutive fiscal year of double-digit growth in total company net sales. In fiscal year 2025, we grew the brand by over $125 million to approximately $920 million in net sales. This tremendous growth was driven by our national advertising campaign, distribution gains, and new merchandising investments to drive trial and awareness.

We also accelerated our innovation efforts with new sandwich varieties and have begun launching a regular cadence of limited-edition flavors starting this summer with a new Peanut Butter and Mixed Berry Spread variety, which is now in stores. These actions continue to increase household penetration and fuel our ambition to have Uncrustables sandwiches everywhere.

The #1 SKU in the total frozen category is an Uncrustables sandwich, with 2 SKUs in the top 10. The Uncrustables brand is leading the entire frozen category in new buyers for households with kids, millennials, and Gen Z. We are expanding into convenience stores and continue to secure commitments to drive growth in this important channel. And, to support the growth in demand, we opened our third and largest Uncrustables sandwich manufacturing facility in McCalla, Alabama, which continues to increase production, thereby driving margin expansion through more efficient cost absorption. With this incredible momentum, we are well on our way for the Uncrustables brand to generate over $1 billion in net sales by the end of fiscal year 2026.

Our second key growth platform, the Café Bustelo brand, continued its momentum as one of the fastest-growing brands in the at-home coffee category. The brand gained dollar and volume share in every segment it competes in, including the mainstream, one cup, and instant categories over the past year. The Café Bustelo brand grew net sales by 19% in our U.S. Retail Coffee portfolio, ending fiscal 2025 with net sales of approximately $400 million.

We remain focused on expanding the Café Bustelo brand nationally and broadening its consumer audience through marketing and innovation and have launched new roast profiles in both pre-pack and one cup formats. These new products have received strong retailer acceptance that exceeded our initial expectations and will help drive another year of anticipated double-digit net sales growth for the brand.

For the Milk-Bone and Meow Mix brands, we continued to drive the humanization trend in the pet category and have created opportunities for our brands to deliver meaningful innovation through our leading volume share positions in dog snacks and dry cat food.

In dog snacks, we launched the first dog treat featuring a human food brand, Milk-Bone Peanut Buttery Bites made with Jif peanut butter, which outpaced all competitor innovations launched in 2024. The launch continues to exceed our expectations and contributed to the strong double-digit net sales growth for our Milk-Bone soft and chewy dog snacks this past fiscal year.

Turning to the Meow Mix brand, we continued to fuel growth through modernized packaging, elevated mainstream options, and margin-accretive innovation. All of which drove share growth and household penetration in the dry cat food category this past year. Our most recent innovation, Meow Mix Gravy Bursts, is off to a strong start and highlights our ability to bring unique innovation to the category.

And for the overall segment, we were able to expand our U.S. Retail Pet Foods margins by over 500 basis points, demonstrating the results of our portfolio optimization strategy and the benefits of our Transformation Office.

Finally, we are taking decisive actions to improve the results of our Sweet Baked Snacks segment, which has not met our expectations. The business was impacted by 2 primary factors which ultimately led to underperformance in the segment. First, consumers continue to be selective in their spending, largely driven by inflationary pressures and diminished discretionary income, causing the sweet baked goods category to recover slower than we anticipated. These trends are causing a reduction in all channels inclusive of convenience, where traffic and spend has been broadly challenged.

Second, we did not perform with excellence from a distribution, merchandising, and competitive standpoint. We are addressing these challenges and are committed to returning the Hostess brand to growth.

With that said, the environment and our assumptions have evolved since we acquired the Hostess Business. Taking into consideration these changes, and with a new leader of our Sweet Baked Snacks Segment in place providing a current perspective of the business, we are updating our expectations and now anticipate 3% long-term net sales growth for the segment. We are also refining our strategy and taking a more focused approach for this business. By narrowing our priorities to 3 key drivers, we will accelerate the stabilization and eventual growth of the Hostess brand through strengthening the portfolio, elevating our execution, and reigniting sustainable growth for the Sweet Baked Snacks segment.

First, we are strengthening our portfolio to stabilize the Hostess brand’s performance and deliver margin expansion. This includes optimizing our assortment, executing portfolio simplification tied to fixed cost reductions, and improving competitiveness through key price points. Actions we are taking include improving core velocities through brand building, media investment, and breakthrough activations. We are currently launching a portfolio redesign across all consumer touchpoints and optimizing our assortment of product offerings through SKU and display rationalization.

In addition to improving core velocities, we are taking steps to rebuild the margin profile of the Sweet Baked Snacks segment through a streamlined bakery footprint and performance enhancement. This includes the recent announcement of the planned closure of our Indianapolis manufacturing facility and through embracing a transformation mindset regarding cost and productivity savings. Further, we are evolving our promotion and trade optimization strategy to meet the needs of today's consumer.

Our second strategic driver for the Sweet Baked Snacks segment is to elevate our execution by improving our supply chain efficiency, streamlining commercial processes, and redeploying resources. To start, we are creating a dedicated Sweet Baked Snacks sales organization to enable greater focus and are reorganizing marketing resources to improve accountability and prioritization within the segment.

Our third driver is to refocus our strategy to reignite sustainable growth. Hostess remains an iconic brand, with strong awareness, category-leading household penetration and beloved products with the #1 brand of packaged donuts in the category in Donettes, the #1 cupcake in the category, and a leading snack cakes brand in Twinkies. We are focusing on the unique areas of strength for the brand by evolving our demand creation strategy to meet the expectations of today's’ sweet snacking consumer and shifting our innovation strategy to ensure we are strengthening the iconic parts of the portfolio.

We will continue to apply our proven brand building model to the Hostess brand. And through these actions, we are confident we can build back momentum and profitability for the Sweet Baked Snacks segment while positioning it for sustainable long-term growth.

Altogether, our key platforms, including the Hostess brand, represent our largest growth opportunities. We anticipate these brands will deliver over 80% of the company's growth over the next 5 years.

Now turning to our fourth quarter results. Total company comparable net sales decreased 1%. And when excluding contract manufacturing sales related to the divested pet food brands, comparable net sales were flat versus the prior year.

In Coffee, net sales increased 11%. Our portfolio is performing well as we navigate record-high green coffee costs and continue to demonstrate the ability to recover increased commodity costs through responsible pricing. Due to higher green coffee costs and the pass-through nature of the coffee category, we took a price increase last June across parts of our portfolio.

In October, we successfully took a second price increase across our entire portfolio, as we saw continued inflation in green coffee. Since then, price elasticity of demand trends have been favorable to our initial expectations, including in the fourth quarter. As we start fiscal year '26, there is a need to take further pricing actions to recover increasing costs from ongoing green coffee inflation. As such, we took a price increase in May, which is now on-shelf, and are planning another price increase for August. Through the combination of these 2 pricing actions, we will recover our anticipated costs for the fiscal year and have contemplated a historical price elasticity of demand impact to volume in our guidance.

Overall, at-home coffee remains a strong and resilient category that provides value to consumers in all economic environments, and at-home coffee continues to represent approximately 70% of all coffee-drinking occasions. Our portfolio provides an affordable price per serving as an alternative to other beverage experiences such as the coffee shop, among others. We continue to anticipate the commodity will normalize over time as it has historically. As always, we will manage our coffee business through a strategy that demonstrates a balance between recovering inflationary input costs while providing consumers with attractive options ranging from value to premium.

In Frozen Handheld and Spreads, net sales was flat versus the prior year, primarily driven by growth for Uncrustables sandwiches, partially offset by decreases for Smucker's fruit spreads and Jif peanut butter. Measured retail dollar sales outpaced net sales in the quarter for Uncrustables sandwiches as we lapped strong distribution gains in the prior year. Last week, we took a list price increase on Uncrustables sandwiches to recover increased costs. This is our first price increase for the brand in over 3 years.

In Pet Foods, net sales decreased 13% versus the prior year, reflecting unexpected retailer inventory headwinds and a reduction in contract manufacturing sales related to the divested Pet Foods brands. Measured retail dollar sales for our dog snacks portfolio in the latest 13-week period declined 7% and Meow Mix cat food dollar sales increased 3%. Overall, the dog snacks category continues to be impacted by a slowdown in discretionary spending largely driven by inflationary pressures. Our portfolio remains well-positioned as we continue to focus on driving growth for the Milk-Bone brand, with its strong leadership position in the category. In cat food, we continue to see tailwinds as the cat population is projected to grow, and we anticipate further share growth for the Meow Mix brand. Dog snacks and cat food are attractive categories and e-commerce trends will remain a tailwind for our portfolio.

In Sweet Baked Snacks, comparable net sales decreased 14%. The decrease in net sales was greater than anticipated, primarily driven by elevated trade recognition in the quarter. Dollar sales for the Hostess brand in the latest 13-week period declined 7%, and we saw a stabilization in our overall share trends.

Finally, in International and Away From Home, comparable net sales grew 4%. Growth was driven by the Away From Home business, as it continues to deliver strong results by leveraging our leading national brands and key growth platforms in Away From Home channels.

As we exit the fiscal year, I would like to highlight a few key points. Our legacy business, which accounts for approximately 85% of our total company net sales delivered strong growth. While near-term performance has not met our expectations for the Sweet Baked Snacks segment, we are taking decisive actions to stabilize and refocus the segment. And we remain confident in our ability to deliver long-term sustainable growth and our ambition to generate over $1 billion in free cash flow annually.

With this in mind, we are amplifying what is working and evolving our strategy where needed. Our strategic priorities for fiscal year 2026 are as follows: First, accelerate organic growth by investing in our key platforms while also enabling the delivery of brands that meaningfully support total company profitability. This includes working to stabilize and refocus the Sweet Baked Snacks segment for sustainable growth and margin expansion. And in each of our businesses, we are focusing on being where the consumer is shopping and growing share with our strategic customers.

Second, embed transformation in our everyday mindset through a continued focus on safety, quality, reliability and cost, integrating savings to drive investment in our brands and aspiring to generate over $1 billion in free cash flow annually while executing on our capital deployment strategy.

And third, we will remain true to our basic beliefs by fostering a ‘Be Bold’ mindset, accelerating our pace of change to grow our competitive edge while enabling greater speed and agility across the organization. This includes continuing to evolve our brands and embed them into today's culture, while ensuring we meet the needs of the consumer.

As we execute these priorities and position the company for long-term growth, we acknowledge that we continue to operate in a dynamic environment including evolving macroeconomic factors, record-high green coffee costs, implications from tariffs, regulatory and policy changes and consumers that continue to seek value.

Given these factors, we are being cautious in our fiscal year 2026 guidance and are providing a wider range. Net sales are expected to increase 2% to 4%. Comparable net sales are expected to increase 4.5% at the mid-point of the guidance range. The increase in net sales will be supported by growth in each of our U.S. Retail segments, when excluding reduced contract manufacturing sales related to the divested pet food brands, and in International and Away From Home. This reflects higher net price realization for the total company and ongoing brand momentum for our key growth platforms, including anticipated volume/mix growth for the Uncrustables, Café Bustelo, Meow Mix, and Milk-Bone brands. We anticipate total company volume/mix to decline, largely driven by our price elasticity of demand assumptions for coffee and a decline in our Sweet Baked Snacks segment.

Adjusted earnings per share is expected to be in the range of $8.50 to $9.50. This reflects the impact from our coffee price elasticity of demand assumptions, increased marketing investments for our key growth platforms, headwinds in the Sweet Baked Snacks segment, and tariffs, partially offset by the positive tailwinds benefiting the business.

Embedded in our guidance range are our assumptions related to the impact from tariffs in the current environment. As a domestic food producer, we are relatively less exposed to tariffs compared to other industries. That said, the current U.S. tariff impact on green coffee is our largest exposure that we will manage on top of navigating record-high costs for the commodity.

Green coffee is an unavailable natural resource that cannot be grown in the continental U.S. due to its reliance on a tropical climate. We currently purchase approximately 500 million pounds of green coffee annually, with the majority coming from Brazil and Vietnam, the 2 largest coffee producing countries. Outside of coffee, the vast majority of our U.S. production is sourced domestically. However, there is some sourcing of finished goods and ingredients that are subject to tariffs as things stand today. This has been factored into our outlook, and we are working to mitigate these cost increases through a combination of alternative sourcing strategies, supply chain optimization, and responsible pricing.

In closing, while we expect the external environment will continue to be dynamic, we remain confident in our strategy. We operate in attractive categories with leading brands and offerings ranging from value to premium. And as we look ahead, we remain focused on investing in our key growth platforms and executing on our strategic priorities, which will enable us to deliver long-term growth and increase shareholder value.

Before I close, I would like to extend my appreciation to all of our employees for their unwavering focus, dedication, and outstanding contributions.

With that, I'll turn it over to Tucker for additional insight on our financials and our fiscal 2026 outlook.

Thank you, Mark. Good morning, everyone. I will begin by providing detail on the noncash impairment charges reflected in our fourth quarter GAAP results. We recognized a $867 million impairment charge related to the goodwill of the Sweet Baked Snacks reporting unit and a $113 million impairment charge related to the Hostess brand indefinite-lived trademark. These impairment charges are driven by the continued underperformance of the Sweet Baked Snacks segment and updated assumptions following the re-evaluation of the strategic priorities of this business to 3 drivers: strengthening the portfolio, elevating our execution, and reigniting sustainable growth.

Due to the continued underperformance of the sweet baked goods category relative to when Hostess Brands was acquired, we now anticipate 3% net sales growth over the long-term. Through our revised strategy, we will stabilize the Hostess brand’s performance and deliver net sales and segment profit growth for the business.

Now, I'll provide an overview of our fourth quarter results and then give additional details on our financial outlook for fiscal year 2026. In the quarter, net sales declined 3%. Comparable net sales decreased 1%, excluding the impact of divestitures and foreign currency exchange. Net sales was flat versus the prior year when also excluding contract manufacturing sales related to the divested pet food brands. The decrease in comparable net sales reflects a 3 percentage point decrease in volume/mix, driven by decreases for dog snacks, sweet baked goods, lower contract manufacturing sales related to the divested pet food brands, and fruit spreads, partially offset by an increase for Uncrustables sandwiches.

Higher net price realization increased net sales by 3%, driven by higher net pricing for coffee, partially offset by lower net pricing for sweet baked goods and dog snacks. Net sales in the quarter were impacted by retailer inventory headwinds in U.S. Retail Pet Foods in addition to elevated trade recognition in the quarter for Sweet Baked Snacks. Outside of these 2 elements, total company net sales overall came in-line with expectations for the quarter.

Adjusted gross profit decreased $84 million, or 9%, compared to the prior year. The decrease reflects higher costs, unfavorable volume/mix and the noncomparable impact of divestitures, partially offset by higher net price realization. Adjusted operating income decreased $39 million or 8%, reflecting the decreased gross profit, partially offset by favorable SD&A expenses. The favorability in SD&A was driven by decreased administrative expenses, lower marketing spend, and reduced pre-production expenses primarily related to the new Uncrustables sandwiches manufacturing facility.

Below operating income, net interest expense decreased $3 million, driven by reduced debt outstanding. The adjusted effective income tax rate was 23.9%, compared to 23.2% in the prior year. Factoring in all these considerations, along with weighted average shares outstanding of 106.7 million, fourth quarter adjusted earnings per share was $2.31, a decrease of 13% versus the prior year.

Turning to our segment results, in the U.S. Retail Coffee segment, net sales increased 11% versus the prior year. Net price realization increased net sales by 10 percentage points, driven by higher net pricing for the Folgers and Café Bustelo brands. Volume/mix was neutral to net sales, reflecting an increase for the Café Bustelo brand, mostly offset by a decrease for the Folgers brand. U.S. Retail Coffee segment profit was neutral versus the prior year, as higher net price realization and lower marketing expenses were largely offset by higher commodity costs.

In U.S. Retail Frozen Handheld and Spreads, net sales was neutral versus the prior year. Lower net price realization decreased net sales by 1 percentage point, primarily reflecting lower net price realization for Jif peanut butter and Uncrustables sandwiches, partially offset by a list price increase for Smucker's toppings and syrups. Volume/mix increased net sales by 1 percentage point, driven by an increase for Uncrustables sandwiches, which was partially offset by a decrease for Smucker's fruit spreads.

U.S. Retail Frozen Handheld and Spreads segment profit decreased 5%, reflecting equipment write-off charges, higher costs, and lower net price realization, partially offset by lower pre-production expenses largely related to the new Uncrustables sandwiches manufacturing facility and lower marketing expenses.

In U.S. Retail Pet Foods, net sales decreased 13% versus the prior year. Volume/mix decreased net sales by 11 percentage points, driven by a decrease for dog snacks and a $16 million decrease in contract manufacturing sales related to the divested pet food brands. Lower net price realization decreased net sales by 2 percentage points, primarily driven by dog snacks and cat food. Net sales declined 10% versus the prior year, when excluding contract manufacturing sales related to the divested pet food brands. U.S. Retail Pet Foods segment profit decreased 7%, driven by unfavorable volume/mix and lower net price realization, partially offset by lower costs and decreased marketing expenses.

In the Sweet Baked Snacks segment, net sales decreased 26% versus the prior year. Excluding noncomparable net sales in the prior year related to the divestitures of the Voortman business and certain Sweet Baked Snacks value brands, net sales decreased 14%. Volume/mix decreased net sales by 9 percentage points, driven by decreases for snack cakes, donuts, and private label products. Lower net price realization decreased net sales by 4 percentage points, reflecting lower net pricing across the portfolio.

Sweet Baked Snacks segment profit decreased 72%, primarily driven by higher costs, lower net price realization, unfavorable volume/mix, and the impact of the noncomparable segment profit in the prior year related to the divested businesses.

Lastly, in International and Away From Home, net sales increased 3%. Excluding $4 million of unfavorable foreign currency exchange, net sales increased 4%. Net price realization contributed a 6 percentage point increase to net sales, reflecting higher net pricing for coffee. Volume/mix decreased net sales by 1 percentage point, as decreases for coffee and portion control products were partially offset by an increase for Uncrustables sandwiches. Net sales for the Away From Home business increased 5% on a comparable basis, led by a double-digit percentage increase for Uncrustables sandwiches. Net sales for the International business increased 4% on a comparable basis, largely driven by our coffee portfolio. International and Away From Home segment profit increased 13%, reflecting higher net price realization and lower pre-production expenses primarily related to the new Uncrustables sandwiches manufacturing facility, partially offset by higher costs.

Fourth quarter free cash flow was $299 million, compared to $298 million in the prior year, driven by a decrease in capital expenditures, partially offset by a decrease in cash provided by operating activities. On a full year basis, free cash flow was $817 million, an increase of $174 million versus the prior year. Capital expenditures were $394 million, representing a 4.5% of net sales, a decrease versus the prior year. Our results demonstrate the continued progress we are making towards our long-term strategic target of capital expenditures at approximately 3.5% of net sales.

Leveraging our strong cash generation, we returned approximately $455 million of cash to shareholders through dividends in the fiscal year. We also increased our quarterly dividend by 2%, marking 23 consecutive fiscal years of dividend growth.

We finished the year with a cash and cash equivalent balance of $70 million and a total net debt balance of $7.6 billion. Based on a trailing 12-month adjusted EBITDA of approximately $2.1 billion, our leverage ratio stands at 3.6x. We plan on continuing to prioritize debt reduction by paying down approximately $500 million of debt annually over each of the next 2 years. With this anticipated deleveraging and overall business growth, we anticipate a leverage ratio at, or below, 3x net debt to adjusted EBITDA by the end of our fiscal year 2027. This level of debt provides financial flexibility for a balanced approach to capital deployment.

Let me now provide additional color on our outlook for fiscal year 2026. We continue to operate in a dynamic and evolving external environment, including tariffs and related trade impacts, regulatory and policy changes, ongoing input inflation, and changes in consumer behaviors that impact our fiscal year 2026 outlook. This guidance reflects the company's expectations based on its current understanding of these factors. We expect full year net sales to increase 2% to 4% compared to the prior year reflecting a $135 million headwind from lapping sales of the divested Voortman business and certain Sweet Baked Snacks value brands, and a $38 million unfavorable impact from reduced contract manufacturing sales related to the divested pet food brands, which we have now exited.

On a comparable basis, net sales are anticipated to increase approximately 4.5% at the midpoint. This reflects growth in each of our U.S. Retail segments, when excluding reduced contract manufacturing sales related to the divested pet food brands and in International and Away From Home. In the Sweet Baked Snacks segment, we anticipate comparable net sales to decline low-single-digits as we look for our actions to stabilize the Hostess brand in the back-half of the fiscal year.

Comparable net sales growth reflects higher net price realization, primarily due to list price increases to recover higher green coffee costs in our U.S. Retail Coffee segment and in International and Away From Home, and a price increase for Uncrustables sandwiches in the U.S. Retail Frozen Handheld and Spreads segment to recover increased costs. Volume/mix is anticipated to be unfavorable, largely driven by our U.S. Retail Coffee segment from the price elasticity of demand assumptions contemplated in our guidance and our Sweet Baked Snacks segment as we continue to experience category and channel headwinds. We continue to see momentum for our key platforms, including anticipated volume/mix growth for the Uncrustables, Café Bustelo, Meow Mix, and Milk-Bone brands.

We anticipate full year adjusted gross profit margin of 35.5% to 36.0%. This reflects increased commodity and manufacturing costs and unfavorable volume/mix, partially offset by higher net price benefits, cost and productivity savings from our transformation efforts, and the realization of synergies. The net impact from our tariff assumptions factored into our adjusted gross profit margin is estimated to be an unfavorable impact of approximately 50 basis points, largely reflected in the U.S. Retail Coffee segment.

SD&A expenses are projected to increase by approximately 3%, primarily reflecting increased marketing investments in the Café Bustelo and Uncrustables brands. Total marketing expense is estimated to be 5.7% of net sales, an increase of 30 basis points or approximately $40 million versus the prior year.

We anticipate net interest expense of approximately $380 million, driven by continued debt paydown. Our adjusted effective income tax rate is anticipated to be 23.7%, along with a full year weighted average share count of 106.7 million.

Taking all these factors into consideration, we anticipate full year adjusted earnings per share to be in the range of $8.50 to $9.50. This wide guidance range includes the following unfavorable impacts: $0.80 from the net impact of our elasticity of demand assumptions in the U.S. Retail Coffee segment, a $0.30 impact from increased marketing investments, a $0.25 net impact from tariffs and $0.20 from a decline in profitability within the Sweet Baked Snacks segment excluding divestiture impacts. These headwinds more than offset the favorable tailwinds benefiting the business including base business momentum, cost and productivity benefits from our Transformation Office; $100 million in total run-rate synergies from the Hostess acquisition by the end of the fiscal year; benefits from mitigating the majority of stranded overhead and continued debt paydown of approximately $500 million.

We project free cash flow of approximately $875 million at the midpoint of our adjusted earnings per share guidance range, with capital expenditures of $325 million for the year. Other key assumptions affecting cash flow include: depreciation expense of approximately $350 million, amortization expense of approximately $200 million, share-based compensation expense of $35 million, and other non-cash charges of $110 million.

In the first quarter of the fiscal year, net sales are anticipated to decline low-single-digits, which incorporates an impact of $53 million related to the divested Voortman business and certain Sweet Baked Snacks value brands. Comparable net sales are anticipated to be flat, reflecting a mid-single-digit increase in net price realization offset by unfavorable volume/mix. Net sales also reflects a decline of $10 million of contract manufacturing sales related to the divested pet food brands.

Adjusted earnings per share are expected to decline approximately 25%, primarily driven by a decrease in adjusted gross profit in our U.S. Retail Coffee and Sweet Baked Snacks segments. We anticipate adjusted earnings per share will improve sequentially throughout the fiscal year.

Overall, in fiscal year 2026, we are committed to maintaining a disciplined and responsible financial approach while strategically investing in our key platforms and executing on our strategic priorities to deliver long-term growth and increase shareholder value. This includes fiscal year 2027, which we anticipate will be an algorithm year for adjusted earnings per share growth, absent any significant changes in the green coffee market and consumer or regulatory environment, inclusive of trade policy.

In closing, I would like to thank our employees. They have demonstrated their commitment to executing with excellence, and their passion for our company positions us for continued success. Thank you.