Operator
Good day, and welcome to the John B. Sanfilippo and Sons, Inc., fourth quarter and full year 2026 Operating Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question, you will need to press star 11 on your touchstone telephone. Please note this call may be recorded. I would like to turn the call over to Jeffrey Sanfilippo, Chief Executive Officer. Please go ahead.
Thank you, Michelle. Good morning, everyone. and welcome to our fiscal 2026 fourth quarter earnings conference call thank you for joining us on the call with me today is frank pellegrino our cfo and jasper sanfilippo our coo we may make some forward-looking statements today these statements are based on our current expectations and they involve certain risks and uncertainties the factors that could negatively impact results are explained in the various sec filings that we have made including forms 10k and 10Q. We encourage you to refer to the filings to learn more about these risks and uncertainties that are inherent in our business. Now I'll turn to results. I'm pleased to report on a strong fiscal 2026 with net sales reaching a record $1.2 billion and diluted earnings per share increasing 4.6% for the full year. Achieving record net sales and earnings growth in a challenging consumer and cost environment is a testament to the strength of our business, the dedication of our team, and the depth of our customer relationships. In addition, we remain committed to returning capital to our shareholders. During the 2026 calendar year, we increased our annual dividend by 5.6% to 95 cents per share and declared a special dividend of a dollar five per share representing a 75% increase with the prior year both dividends will be paid on September 9th 2026 bringing total dividends paid during 2026 calendar year to $3.50 per share this year marks our 15th consecutive year of returning capital to shareholders through dividends and the ninth consecutive year of increasing our annual dividend reflecting the strength of our balance sheet, our consistent cash generation, and our ongoing commitment to creating long-term shareholder value. While our bottom line results for the most recent fourth quarter did not match last year's results, we were encouraged to see a return to growth in our company-wide sales volume after five consecutive quarters of decline. We believe this is a positive signal for our entire portfolio. Fourth quarter profitability was impacted by several challenges including higher than anticipated input and transportation costs, manufacturing inefficiencies associated with the continued onboarding of a large contract manufacturing customer, and certain customer-related charges. We are actively responding to these increased costs, executing mitigation plans to manage unexpected customer charges, and improving operational efficiencies as we move into fiscal 2027. There are three key priorities for JBSS in the coming year. First, we are focused on restoring volume in the snack nut and trail mix categories. Consumer trends indicate that shoppers remain highly value conscious after several years of elevated prices across the snacking segment. To address this, we are working with an external partner on a consumer study to better understand how we can re-engage shoppers and drive volume growth without sacrificing margin. These insights will help guide our approach to optimizing value propositions, pack price architecture, promotional effectiveness, and selective price adjustments. There continue to be positive tailwinds in the nut category as strong health and wellness trends are having a significant impact on consumer food purchases. Our second priority is to expand our bar portfolio and sell through the significant new manufacturing capacity we have added at our Elgin facility. Our engineering team has done an outstanding job bringing the new high-speed bar lines we purchased online, and we expect them to be fully operational by the second quarter of fiscal 2027. In parallel, our R&D, sales, marketing, procurement, and technical services teams have worked hard together to build a robust pipeline of new products that have been presented to customers. Consumer trends are strong for higher protein and higher fiber products, and our bar portfolio is positioned perfectly to meet this growing demand. We are very optimistic about securing new distribution in the near future, and we estimate over $300 million in potential new growth for JBSS as we sell the capacity on these lines. Our third priority is to manage cost volatility with a relentless focus on productivity. Like many food manufacturers, we continue to face uncertainty across commodities, packaging, energy, transportation, labor, and tariffs. Teams across our organization are focused on reducing cost where possible while improving productivity and efficiency key areas of focus include ai enabled process enhancements plant efficiency skew rationalization trade spend effectiveness procurement savings and supply chain optimization i'll turn the call over to frank to discuss our financial performance thanks jeffrey starting with the income statement net sales for the fourth quarter of fiscal 2026 increased by 4.2% to $280.4 million compared to net sales of $269.1 million for the fourth quarter of fiscal 2025.
The increase in net sales was due to a 2.8% increase in the weighted average sales price per pound and a 1.4% increase in sales volume for pounds sold to customers. The increase in the weighted average selling price primarily reflected pricing actions taken in response to higher commodity acquisition costs for peanuts and all major tree nuts except walnuts, which was partially offset by a shift in product mix towards lower priced items in the current quarter. Sales volume in the consumer distribution channel slightly increased by 0.8% due to a 2.4 percent increase in private brand sales reflecting higher volume in private label nuts and trail mix. Flow was partially offset by decreased borrowers volume due to our strategic decision to reduce sales to a grocery store retailer. The increase in private label nuts and trail mix volume was positively impacted by initial shipments to the new grocery retailer and expanded distribution at two existing grocery retailers, which was partially offset by lost private-level business at an online retailer. In addition, our branded sales were negatively impacted by decreased Fisher recipe nut sales due to the timing of the Easter holiday and related promotional activity, as well as lower sales of Southern Style Hunter Mix, which was temporarily withdrawn from the market following a product recall of an externally sourced ingredient contained in that snack mix. Sales volume decreased 5.4 percent in the commercial ingredients channel mainly driven by timing of a peanut crush in stock sales and sales volumes were elevated in the preceding order. Food service sales volume remained relatively flat in the quarterly comparison. Sales volume in the contract manufacturing channel increased 12.6 percent due to increased snack nut sales to a significant new customer that we've added during the second quarter of the prior year. This increase was partially offset by decreased granola sales value. Roast profit decreased by $4.6 million or 9.5% to $44.1 million compared to the fourth quarter of last year, driven by $2.7 million of recall-related costs associated with the dry milk powder supplied by a third-party manufacturer incorporated in our selling solid nuts products. gross profit was also negatively affected by higher customer claims higher snack bar ingredient costs manufacturing efficiencies higher freight expense gross profit margin decreased to 15.7 percent of net sales compared to 18.1 percent for the fourth quarter of fiscal 2025 due to the reasons previously mentioned and partially offset by higher net sales base total Operate expenses increased by $3.1 million compared to the prior year of fourth quarter driven by higher incentive compensation, freight and marketing insights expenses, which was partially offset by an estimated insurance recovery associated with the dry milk powder refill. Total operate expenses and percentage of net sales for the fourth quarter of fiscal 2026 increased to 11.3% from 10.6% compared to prior year comparable quarter. Interest expense was $400,000 for the fourth quarter of Fiscal 2026, compared to $1.2 million for the fourth quarter of Fiscal 2025, due to higher average line of credit levels. Net income for the fourth quarter of Fiscal 2026 was $8.4 million, or $0.71 per diluted share, compared to $13.5 million, or $1.15 per diluted share for the fourth quarter of Fiscal 2025. Now, I'm taking a look at inventory. The total value of inventories on hand at the end of the current four-quarter decreased 8.8 million or 3.4 percent compared to a prior year of concurred a quarter. The decrease was driven by lower finished goods inventories for bars, lower walnut acquisition costs, and lower on-hand quantities of pecans and walnuts, which were partially offset by higher pecan and almond acquisition costs. The weighted average cost per pound of raw nut and dried fruit input stock on hand increased 12.1 percent due to higher pecan and almond acquisition costs partially offset by lower wallet acquisition costs. Moving on to year-to-date results. Net sales for fiscal 2026 increased 6.2 percent to 1.2 billion compared to fiscal 2025. The increase in net sales is primarily attributable to an 8.9 percent increase in the weighted average selling price per pound which was partially offset by a 2.5 percent decrease in sales volume. The sales volume decrease was due to lower sales volume in the consumer channel, partially offset by sales volume increases in the commercial ingredients and contract manufacturing channels. Growth profit margin decreased to 18% of net sales compared to 18.4% in the prior fiscal year, mainly attributable to the factors noted earlier in the quarterly comparison and lower inventory valuation adjustments, which were partially offset by aligning our pricing more closely with our commodity acquisition costs and the absence of a one-time pricing concession recognized in the prior year. Total operating expenses increased $3.2 million in fiscal 2026 compared to fiscal 2025. Primarily due to higher incentive compensation expense, this increase was partially offset by the estimated insurance recovery related to the dry milk powder recall, lower compensation expense, a net gain of disposal of non-core equipment compared to a net loss in the prior year and reduced marketing insight spending and lower third-party warehouse costs. The interest expense was $2.4 million for fiscal 2026, compared to $3.6 million for fiscal 2025. Net income for fiscal 2026 was $61.9 million, or $5.26 per doula chair, compared to $58.9 million, or $5.03 per doula chair for fiscal 2025. Please refer to our 10k for additional details as we go on our financial performance for fiscal 2026. Now I'll turn the call over to Jeffrey to provide additional comments.
Thanks Frank for the financial updates. Now let's shift to consumption activity and category updates. All the market information I'll be referring to is Sarkana panel data, and for today it is for the period ending June 28th, 2026. When I refer to Q4, I'm referring to 13 weeks of the quarter ending June 28th, 2026. References to changes in volume are versus the corresponding period one year ago. For pricing commentary, we are using Surkana Mulo scan data, and we are referring to average price per pound. We are using the nut, trail mix, and bar syndicated views of the category as defined by Surkana. In the fourth quarter, we continue to see modest growth in the broader snack aisle as defined by Surkana. Volume in dollars were up 0.7% and 3% respectively, driven by price increases. This is consistent with the performance we saw in Q3. In Q4, the snack nut and trail mix category was down 7% in volume and 3% in dollars, which is a continued acceleration of the volume softness we saw last quarter. Snack nut prices rose 5%, with increases across nearly all nut types. Prices rose 7% for trail mixes. Our private label, consumer snack and trail shipments performed substantially better than the category, with pound shipments up 3% versus last year. This positive momentum was driven by new distribution across several grocery retailers. Fisher's snack and trail mix performed better than the category, with pound shipments up 15%. Fisher's performance was due to expanded assortment of a specialty retailer and strength within the e-commerce channel. Our Orchard Valley Harvest brand, which primarily plays in trail mix, was down 26% in pound shipments during Q4. General category softness paired with lapping rotations at a club retailer drove the decline. Our Southern Style Nut brand experienced a 27% decrease in pound shipments, driven by a voluntary recall within the Southern Style portfolio, which Frank already mentioned. Now let me turn to the recipe nut category. In Q4, the recipe nut category was up 6% in pounds and up 12% in dollars, driven by growth in private label as a discount retailer expanded store accounts. The recipe category experienced a 7% price increase, driven by pecans. Our Fisher-Rusby pound shipments were down 12% in Q4 due to slower velocities among grocery retailers. Now we'll switch to the bar category. In Q4, the bars category grew by 2% in pounds and 5% in dollars, which is consistent with last quarter. Bars category momentum continued to be driven by a branded player growth in the protein segment of the bar category. Private label was down 5% in pounds and down 4% in dollars as consumer preferences shift to protein bars which is comprised primarily of branded offerings. Our private label bar shipments were down 3% versus a year ago which is consistent with private label category trends. In closing as we enter fiscal 2027 we have strong momentum and optimism as we continue to execute our strategic plan. We are actively pursuing additional opportunities to grow sales volume across all three of our distribution channels, and we are encouraged by early signs of success. At the same time, we remain focused on disciplined cost management and driving further operational efficiencies. That said, we recognize that significant external uncertainties remain, including tariffs, inflation, unpredictable commodity costs, and broader macroeconomic challenges. These factors will require us to stay agile and responsive as the year progresses. We are committed to taking the necessary actions to deliver long-term sustainable growth, enhanced margins, and continue to create value for our customers, consumers, and shareholders. As I mentioned last month, I will be stepping down as Chief Executive Officer in October to assume the role of Executive Chairman, and my brother Jasper will succeed me as CEO. Over the last several years, we have made significant investments in our people, our capabilities, and our infrastructure that we believe will support long-term sustainable growth. These investments, combined with a disciplined growth strategy focused on continuous improvement, innovation, customer partnership, and operational excellence, should position the company for continued success. Under Jasper's leadership, I'm confident JBSS will continue to execute its strategic plan, strengthen its market position, and capitalize on future growth opportunities. As I reflect on the past 20 years, I want to sincerely thank our current and former employees for their hard work, dedication, and commitment. Together, we have transformed JBSS into a stronger, more diversified, and more profitable organization while preserving the entrepreneurial and family-oriented culture that has always defined our company. Our ability to remain nimble, adapt to changing market conditions, and work collaboratively to serve our customers has been a key driver of our success and is a big part of our culture. It has been an honor to lead this remarkable organization as CEO, and I'm deeply grateful to our employees, customers, suppliers, and shareholders for their trust, support, and partnership throughout this journey. We appreciate your participation in the call, and I thank you for your interest in our company. I will now open the call to questions. Michelle, you can open up the lines.
Operator
Thank you. As a reminder, to ask a question, please press star 11. If your question has been answered and you'd like to remove yourself from the queue, press star 11 again. Our first question comes from Hamad Korsan with BWS Financial. Your line is open.
Good morning. Could you just expand upon the comment that I heard you say about litigation expense and customer charges and what's going on there?
Yeah, so this is Jeffrey. So we had some unexpected deductions from a major customer that we are still negotiating with that customer to regain some of those deductions. So something out of our control that occurred in Q4, but we are working actively to try to get some of that money back.
Okay, and my other question was, any update as far as the new equipment being installed and acceptance with any new potential customers?
Sure, I'm Ed. This is Jasper. We're currently on track for both the high-speed fruit and grain and the Chewy Bar line. We're expecting the Chewy Bar line to be up and operational by the end of October. and then the fruit and grain bar shortly thereafter.
And any sampling going on right now, or you're still waiting to bring it completely online?
No, we are actually actively pursuing new customer business. We've created a lot of samples that have gone out to all our key customers, a very positive response from them. But, yeah, the operation will be up and running. We're hoping in October to actually produce products. So as soon as we get a new customer online, we will start shipping in the third quarter.
Yeah, actually, this week we're testing the functionality of the Chewy Bar Kitchen, and then we'll follow that with actually making the bars and then run it through packaging. So we're on time and looking in good shape for both wines.
Okay, great. And my last topic was, as far as nuts and shale mix is concerned, are you changing production to go towards more small packages in any way, maybe to lower the price of a consumer? Are you seeing that kind of demand right now?
Yeah, it's a combination. We're looking at innovation, obviously. Protein and fiber is a very important product line that we've recently launched in our Orchard Valley Harvest. It's a go-go protein peanut, and we are launching a go-go protein almond. So we're really looking at consumer trends. Protein is high. Fiber is extremely important. So we're looking not only at the product, but then also the pack sizes and the price points. So making really selective promotional price points that we feel will help us drive growth in the category.
Operator
Thank you. Our next question comes from Nick Otten with National Bank Financial.
Your line is open. hi good morning guys morning I just had some stuff on the charges and everything so the higher input costs and transportation like do you expect that you can pass this on eventually or is this continue going to be something that you're going to have to eat going forward no we will do our best to pass out pass out those costs along again if they keep increasing it becomes more difficult but no those are incurred during a quarter and we will pass those along during our next pricing review and then how much of that was that in the quarter is it like a small amount is a couple million dollars or it was a couple of million dollars and uh and we are working hard to get those those price increases for freight uh with
our customers today so we should expect to see that in q2 i think it's mainly freight and fuel related like uh surcharges and also you know the resident market is off with packaging which kind of relates to fuel also so all those things that kind of escalated during the quarter and then on On the bar lines, you were just talking about chewing granola, but I thought you guys were also doing some protein going on there, so I was wondering when that's going to get started up, because it is one of the bigger markets there.
Yeah, we, through Q4, did commercialize both some fig bar offerings as well as some protein bar offerings. We'll continue to do so. We are running trials currently for other protein bars. We believe that some of those bars will be in the market sometime early Q3. But we do continue to add capabilities to our current protein bar line to keep up with the growing brand that Jeff referred to with some of the branded players.
And then how long, like you're talking about this $300 million opportunity, is this like you can achieve it in a year, two, three? Like what is the timeline that your expectation for this to really start ramping?
I thought I had to guess somewhere between three to five years.
And then do you, like, are there any customers signed up at all? Like, is Costco a customer, or what's going on just to underwrite these investments overall?
We're actively working with both large retailers as well as some opportunities we've come across in the Coman channel.
Yeah, so we're looking at everything from Club Channel, obviously Sam's in Costco, to Grocery, Alternative Channel, there's opportunities. And as Jasper mentioned, Coman, some of the big brands could be potential customers as well for us. You're right. The fastest growing segment is that protein forward. So you look at Bear Bells, Build Puff, David's, and they're all doing extremely well in the category. And retailers see that growth and they're looking for private brand options.
And then, Frank, we talked about it in the past. Like, are we just finally seeing this, like, NutPrice squeeze these smaller players that had still in share, but they're coming back your way and everything?
We're seeing them because NutPrice is a little more competitive. about there and then it's like we're having an El Nino year so are we going to go through this cycle again where nuts are going to get all this rain we're going to see lower pricing and then more competition or what are your expectations going for next we haven't seen any effects from El Nino yet but the crops look pretty decent out in California with maybe the exception of the early indications of the almond crop but all the other crops look like for a pretty good shape.
Okay, thanks. That's it for my questions for me.
Operator
Thank you. Thank you. Again, if you'd like to ask a question, please press star one one. Our next question comes from Ron Materko with MCM. Your line is open.
Hey, hi, guys. And, Jeff, thank you so much for, you know, for your stewardship of the company. And we appreciate, you know, your candor and you're working so hard for us. I just had a question. I think a lot of questions were answered by the previous two guys. But just to summarize the VAR business, you are going to be targeting the higher end and the protein and fiber content things but doing it in a private label way so as not to – because the market seemingly is growing away from just the real high-priced branded contingent. Is that correct? And do you intend to do anything proprietary in your own branding at some point down the road?
Yes. Right now we're focused on just getting the successful brands emulated and get private label offerings in the retail market. I think the co-pack or the co-manufacturing opportunity for some of these brands does allow us to get into other channels where private label wouldn't work, for example, sports stores, gyms, and things of that nature. But, yeah, at some point, we will work with our customers to develop proprietary formulas for them.
Okay. I would just add to that. So if you look at the category, you've got the biggest volume would be something like fruit and grain, the chewy granola bars. These high-speed lines will make us more competitive in those categories. But then the bigger focus is on research and development, innovation in the forward protein bars, as I mentioned earlier. And that's where the biggest growth is coming from, is those high-protein bars in the category. So we have a combination of the volume items with 2E, granola, and fruit and grain, but then the high margin, high growth in the protein-forward bars.
Okay. And, you know, from the acquisition, it sounds like you're putting in the new lines are going to be in Elgin, like where you guys live. And would that be, like, new technology that you've had to adopt from, like, the bar business that you bought? I know you guys have been in the bar business for a long time, so could you just talk a little bit about that?
Sure. This is Jasper. The two high-speed lines are really balancing out our manufacturing capability. Obviously, there are certain SKUs that are high volume, which we will be moving to the high volume bar lines. But there are a lot of other SKUs that we have, both at large retailers and small retailers, that would not warrant running on a very, very high-speed bar line. And so much like we did for Snack, Dutton, Trail, we developed our manufacturing capabilities to run low volumes very efficiently as well as high volumes very efficiently. And that's really what this investment represents, is just balancing out our manufacturing capabilities to better fit our customer demands.
Okay. And those lines will be up and running by the end of October?
Okay. Good. Thank you very much. Thank you. Thanks for your questions.
Operator
Thank you. I'm showing no further questions at this time. I'd like to turn the call back over to Jeffrey Sanfilippo for closing remarks.
Thanks, Michelle. So we appreciate your participation in the call, and thank you for interest in our company. I would like to mention that upcoming events, the company will be presenting at the BWS Financial Growth and Values Summer Investor Series Conference in New York City this coming Tuesday, August 25th, and the Midwest Ideas Conference in Chicago on August 27th. Qualified investors that would like to schedule a meeting with management should contact three-part advisors at the phone number below thank you for your interest have a great day thank you for your participation you may now disconnect
