PENNSAUKEN, NJ. — Executives at J&J Snack Foods plan to expand the reach of Dippin’ Dots, which the company acquired in June. A venture into retail is possible.
“We’ve already made significant progress introducing the Dippin’ Dots sales team to new customers and channels, including under-penetrated markets and theaters and foodservice, and with Dippin’ Dots, we’re proud to announce the first cross-brand collaboration, the new Icee cherry and blue raspberry flavors launching in fiscal Q1,” said Dan Fachner, president and chief executive officer, in a Nov. 15 earnings call to discuss fiscal-year results. “We are also starting to explore new product concept designed to extend Dippin’ Dots into the retail channels.”
Sales in the company’s foodservice segment in the fourth quarter ended Sept. 24 increased 29% to $257.8 million from $198.8 million. Dippin’ Dots accounted for $31.5 million.
In the fiscal year companywide, net earnings of $47.2 million, or $2.47 per share on the common stock, were down 15% from $55.6 million, or $2.92 per share, in the previous fiscal year. Net sales of $1.38 billion were up 21% from $1.14 billion. Operating expenses increased to 22.3% of sales, up from 19.9% in fiscal 2021. The increase reflected freight and distribution cost increases, wage increases and administrative cost hikes.
“Like almost every other company this year, our bottom-line results were impacted by the inflationary impact on raw materials and escalating supply chain costs,” Mr. Fachner said. “Throughout the fiscal year, we saw sequential and year-over-year increases in costs associated with ingredients, truck driver wages, outside carriers, storage and fuel.”
J&J Snack Foods has increased prices three times over the past 14 months.
“Gross margin trends have already improved in the second half of fiscal 2022 because of these actions and we expect to see continued benefits in fiscal 2023,” Mr. Fachner said. “Going forward, we will continue to focus on improved manufacturing efficiencies, cost-reduction initiatives and product mix. As the inflationary environment stabilizes and we execute these initiatives, we are confident that our business will deliver higher margins along with continuing strong sales.”
Increasing prices a fourth time could be more difficult.
“I think the environment gets tougher and tougher to take pricing at this point,” Mr. Fachner said. “I think it’s acceptable on the beverage side because it’s normally done annually. I think the other piece of our business gets tougher and tougher. We’re watching it closely, kind of understanding what others are doing, and then watching what commodities are doing at the same time.”
Foodservice sales in the fiscal year increased 20% to $872.7 million, led by frozen novelties, churros, handhelds, pretzels and bakery. Frozen novelties benefited from the Dippin’ Dots acquisition.
“We have multiple Icee tests in progress with quick-serve restaurants, including a multi-store test with a hamburger chain with over 350 locations,” Mr. Fachner said. “We have also onboarded a number of new customers, including a major convenience store customer, a new cinema chain and Peter Piper Pizza reflecting our efforts around product extensions.”
Retail sales grew 7% to $197.9 million, driven by soft pretzels and frozen novelties.
“In our frozen novelty business, we are launching new Icee and Slush Puppie frozen pots to complement the rest of our strong frozen novelty portfolio,” Mr. Fachner said.
Frozen beverage sales increased 32% to $310 million as more consumers visited amusement parks, live event venues, convenience stores, restaurants and retail venues.
In the fourth quarter companywide for Pennsauken-based J&J Snack Foods, net earnings of $17.3 million, or 90¢ per share, were down 8% from $18.9 million, or 99¢ per share. Net sales increased 24% to $400.4 million, up 24%.