J&J Snack Foods CEO Touts Margin Gains, Sees Growth Ahead Despite Sales Decline

J&J Snack Foods (NASDAQ: JJSF) is navigating a significant operational overhaul, with a major cost-saving initiative boosting profitability even as the company manages declining sales and rising input costs. In an exclusive interview with Investing.com, CEO Dan Fachner expressed confidence that a leaner business structure will position the company for a return to growth.

Margin Expansion Amid Sales Dip

Despite a 6.2% year-over-year decline in third-quarter sales to $426 million, J&J Snack Foods reported a slight increase in gross profit to $151 million. More significantly, its gross margin expanded by 240 basis points to 35.5%, a notable achievement amid persistent headwinds from raw material, freight, and fuel costs.

Fachner attributed the margin strength to the company's efficiency program, dubbed "Project Apollo." The initiative is now expected to generate $25 million in annual savings, an increase from the previous target of $20 million. "From the big picture, Project Apollo is working as intended," Fachner stated, adding that it effectively "protected our margins."

Streamlining for Growth

A primary factor weighing on revenue is the company's planned reduction of its bakery business. Fachner confirmed this process will be "largely complete" in the fourth quarter and should be "largely behind us" as the company enters fiscal year 2027.

With that drag removed, the company plans to sharpen its focus on core brands like Dippin’ Dots, ICEE, SuperPretzel, and churros. "We believe the efficiencies from Project Apollo are sustainable," Fachner said, highlighting the strategy to pursue new customers and partnerships for its flagship products.

Bright Spots in Retail and Beverages

Ad

Consumer demand for the company's products shows encouraging signs. While reported retail sales grew 1.7%, Fachner noted the underlying performance was stronger, representing "mid-single digits" growth when excluding the impact of slotting fees for new product introductions.

Several emerging brands are delivering robust growth in tracked retail channels:

• Dogsters frozen dog treats saw sales increase by over 30%.
• Luigi’s Real Italian Ice grew by more than 20%.
• The retail launch of Dippin’ Dots has been a breakout success, with sales climbing over 100% to nearly $4 million.

The company's frozen beverage business also remains a strong performer, with net sales up 5.9%, driven by strength in movie theaters and large retail channels.

Capital Allocation and Outlook

J&J Snack Foods continues to balance investment with shareholder returns, having distributed approximately $120 million this year through dividends and stock repurchases. Fachner also noted that management is actively evaluating potential acquisitions, focusing on brands that offer a "natural fit" and synergistic opportunities with its existing portfolio.

As Project Apollo's savings exceed targets and the bakery business transition concludes, Fachner is optimistic about the company's trajectory. He stated J&J Snack Foods is entering fiscal 2027 with a leaner cost structure and greater capacity for growth.