DOW JONES NEWSWIRES J.M. Smucker Co.'s (SJM) fiscal first-quarter earnings improved 8.4% yet profit margins came under pressure due to continued high costs for raw materials. The food company, which gets most of its revenue from U.S. retail coffee, earlier this week said it cut coffee prices on most of its coffee products sold in the U.S. by an average of 6%. That decision came after a year in which the company raised prices a total of 23% in an effort to battle soaring costs. Thursday, Smucker said it expects that the company will continue to recognize steep green coffee costs in the year ahead, particularly in its second quarter. Food manufacturers increasing prices in the face of rising costs have recently begun to express caution about pushback from consumers. Smucker appears to be the first major coffee roaster to cut prices, which could put pressure on competitors like Kraft Foods Inc. (KFT), owner of the Maxwell House brand. Reporting its quarterly results earlier this month, Kraft said price increases figured prominently in its 13% jump in net revenue in the second quarter. For the quarter ended July 31, Smucker reported a profit of $111.5 million, or 98 cents a share, up from $102.9 million, or 86 cents a share, a year earlier. Excluding items such as restructuring, merger and integration costs, per-share earnings rose to $1.12 a share from $1.04 a year ago. Sales popped 14% to $1.19 billion. Analysts polled by Thomson Reuters expected earnings of $1.08 a share on $1.25 billion in revenue. Gross margin slid to 36.3% from 39%, reflecting higher costs for green coffee, flour and other raw materials. U.S. retail coffee sales, which includes brands like Folgers and Dunkin' Donuts, climbed 27% and profit rose 25%. Smucker attributed the segment's strong performance primarily to price increases taken over the last 12 months. Smucker's retail consumer segment sales improved 2.4%, though profit declined 15% due to higher raw material costs. Shares closed Wednesday at $75.56 and were inactive premarket. Through the latest close, the stock is up 15% since the start of the year. -By Mia Lamar, Dow Jones Newswires; 212-416-3207; mia.lamar@dowjones.com
