SANFILIPPO JOHN B & SON INC

Net Sales

In the third quarter of fiscal 2025, our net sales decreased 4.0% to $260.9 million compared to net sales of $271.9 million for the third quarter of fiscal 2024. Sales volume, which is defined as pounds sold to customers, decreased 7.9%. The weighted average sales price per pound increased 4.2% primarily due to higher commodity acquisition costs for all major tree nuts

For the first thirty-nine weeks of fiscal 2025 our net sales were $838.2 million, an increase of $41.0 million, or 5.1%, compared to the same period of fiscal 2024 primarily due to the Lakeville Acquisition. Excluding the fiscal 2025 first quarter's impact of the Lakeville Acquisition, net sales remained relatively unchanged rising from $797.2 million to $797.7 million and sales volume also remained relatively unchanged.

The following table summarizes sales by product type as a percentage of total gross sales. The information is based upon gross sales, rather than net sales, because certain adjustments, such as promotional discounts, are not allocable to product type.

The following table shows a comparison of net sales by distribution channel (dollars in thousands):

(1)

Sales of branded products were approximately 13% and 14% of total consumer sales during the third quarter of fiscal 2025 and fiscal 2024, respectively. Fisher branded products were approximately 56% and 54% of branded sales during the third quarter of fiscal 2025 and fiscal 2024, respectively, with Orchard Valley Harvest branded products accounting for the majority of the remaining branded product sales.

The following table shows a comparison of net sales by distribution channel (dollars in thousands):

(1)

Sales of branded products were approximately 17% and 19% of total consumer sales during the first thirty-nine weeks of fiscal 2025 and fiscal 2024, respectively. Fisher branded products were approximately 63% and 65% of branded sales during the first thirty-nine weeks of fiscal 2025 and fiscal 2024, respectively, with Orchard Valley Harvest branded products accounting for the majority of the remaining branded product sales.

Net sales in the consumer distribution channel decreased $11.2 million, or 5.0%, and sales volume decreased 9.2% in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024. The sales volume decrease was driven by a 16.0% decrease in bars volume due to reduced sales to a mass merchandising retailer following a temporary increase in bar sales due to a national brand recall in the third quarter of fiscal 2024. Our strategic decision to reduce sales at a grocery store retailer and lost distribution at another grocery retailer further contributed to the decline in bars volume. Additionally, the discontinuance of peanut butter at the same mass merchandising retailer and decreases in almonds, snack nuts and trail mix driven by increased retail prices at two mass merchandising retailers contributed to the sales volume decrease. However, these declines were partially mitigated by increased sales of walnuts and pecans at the same retailer, along with new distribution at two grocery store customers. Sales volume of Orchard Valley Harvest decreased 33.8% mainly due to delayed orders from a major customer in the non-food sector.

In the first thirty-nine weeks of fiscal 2025, net sales in the consumer distribution channel increased $43.8 million, or 6.7%, and sales volume increased 6.1% compared to the same period of fiscal 2024 due to the Lakeville Acquisition. Excluding the fiscal 2025 first quarter's impact of the Lakeville Acquisition, net sales in the consumer distribution channel increased $6.0 million, or 0.9%, and sales volume decreased 1.4%. This sales volume decrease was due to soft consumer demand and decreased seasonal nut and trail mix volume at a mass merchandising retailer. Additionally, decreases in almonds and peanuts caused by increased retail prices and the discontinuance of peanut butter at another mass merchandising retailer. However, these declines were partially mitigated by increased sales of snack nuts and trail mix, walnuts and pecans at the same retailer. Private brand sales volume increased 8.0% largely due to the Lakeville Acquisition. Excluding the fiscal 2025 first quarter's impact of the Lakeville Acquisition, private brand sales volume decreased 0.7% due to the same reasons cited previously.

Net sales in the commercial ingredients distribution channel decreased $2.3 million, or 8.6%, and sales volume decreased 8.3% in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024. The sales volume decrease was mainly driven by competitive pricing pressures and decreased foodservice peanut butter sales.

In the first thirty-nine weeks of fiscal 2025, net sales in the commercial ingredients distribution channel decreased $4.7 million, or 5.6%, and sales volume decreased 2.0% compared to the same period of fiscal 2024. Excluding the fiscal 2025 first quarter's impact of the Lakeville Acquisition, net sales in the commercial ingredients channel decreased $5.0 million, or 6.0%, and sales volume decreased 2.6%. The sales volume decrease was due to competitive pricing pressures. This decrease was partially offset by higher sales from new distribution to a foodservice customer and higher sales of peanut crushing stock to peanut oil processors.

Net sales in the contract manufacturing distribution channel increased $2.6 million, or 13.6%, and sales volume increased 6.0% in the third quarter of fiscal 2025 compared to the third quarter of fiscal 2024. The increase in sales volume was due to increased granola volume processed in our Lakeville facility. Sales to a new customer and an opportunistic sale to a current customer contributed to the overall increase. These gains were significantly offset by reduced peanut sales volume to a major customer due to soft consumer demand.

In the first thirty-nine weeks of fiscal 2025, net sales in the contract manufacturing distribution channel increased $1.8 million, or 2.9%, and sales volume increased 25.2% compared to the same period of fiscal 2024. The sales volume increase was due to increased granola volume. Excluding the fiscal 2025 first quarter's impact of the Lakeville Acquisition, net sales in the contract manufacturing channel decreased $0.6 million, or 1.0%, and sales volume increased 14.0% for the reasons cited in the quarterly comparison.

Gross Profit

Gross profit increased by $6.7 million, or 13.7%, to $55.9 million for the third quarter of fiscal 2025 compared to $49.2 million for the third quarter of fiscal 2024. The increase in gross profit was predominantly due to inventory valuation adjustments that we anticipated from a significant increase in commodity input costs, which may not recur next quarter. The inventory valuation adjustment was primarily driven by the transition from a lower-cost to a higher-cost crop year for walnuts and pecans. To a lesser extent, gross profit was also impacted by favorable manufacturing efficiencies. These gains were partially offset by higher commodity acquisition costs for all major tree nuts. Our gross profit margin, as a percentage of net sales, increased to 21.4% for the third quarter of fiscal 2025 compared to 18.1% for the third quarter of fiscal 2024 mainly due to the factors mentioned previously.

Gross profit was $154.7 million for the first thirty-nine weeks of fiscal 2025 compared to $164.1 million for the first thirty-nine weeks of fiscal 2024 due to increased commodity acquisition costs for all major nut commodities except pecans, as well as competitive pricing pressures and strategic pricing decisions, which were offset by the factors cited above and improved profitability on bars due to manufacturing efficiencies. Our gross profit margin, as a percentage of net sales, decreased to 18.5% for the first thirty-nine weeks of fiscal 2025 compared to 20.6% for the first thirty-nine weeks of fiscal 2024 mainly due to the factors mentioned previously.

Operating Expenses

Total operating expenses for the third quarter of fiscal 2025 decreased by $3.1 million, or 10.2%, to $27.7 million. Operating expenses decreased to 10.6% of net sales for the third quarter of fiscal 2025 compared to 11.3% of net sales for the third quarter of fiscal 2024.

Selling expenses for the third quarter of fiscal 2025 were $18.6 million, a slight decrease of 0.1% from the third quarter of fiscal 2024. The decrease was driven by a $1.5 million decrease in incentive compensation expense which was largely offset by a $1.4 million increase in rent expense related to our new Huntley, IL facility lease.

Administrative expenses for the third quarter of fiscal 2025 decreased $3.1 million, or 25.5%, to $9.1 million compared to $12.2 million for the third quarter of fiscal 2024. The decrease was due to a $3.1 million decrease in incentive compensation expense.

Total operating expenses for the first thirty-nine weeks of fiscal 2025 decreased by $3.5 million, or 3.7%, to $90.1 million. Operating expenses decreased to 10.8% of net sales for the first thirty-nine weeks of fiscal 2025 compared to 11.7% of net sales for the first thirty-nine weeks of fiscal 2024. The decrease in total operating expenses is net of the $2.2 million net gain on bargain purchase that occurred in the second quarter of fiscal 2024 due to the Lakeville Acquisition.

Selling expenses for the first thirty-nine weeks of fiscal 2025 were $61.1 million, a decrease of $0.6 million, or 0.9%, from the first thirty-nine weeks of fiscal 2024. The decrease was driven primarily by a $4.0 million decrease in advertising and consumer insight research expense and a $3.1 million decrease in incentive compensation expense. These decreases were largely offset by a $3.4 million increase in rent expense related to our new Huntley, IL facility lease, a $1.5 million increase in freight expense due to an increase in delivered sales pounds, and a $1.7 million increase in compensation-related expenses.

Administrative expenses for the first thirty-nine weeks of fiscal 2025 decreased $5.2 million, or 15.1%, to $29.0 million compared the first thirty-nine weeks of fiscal 2024. The decrease was primarily due to a $5.6 million decrease in incentive compensation expense.

Income from Operations

Due to the factors discussed above, income from operations was $28.2 million, or 10.8% of net sales, for the third quarter of fiscal 2025 compared to $18.4 million, or 6.7% of net sales, for the third quarter of fiscal 2024.

Due to the factors discussed above, income from operations was $64.6 million, or 7.7% of net sales, for the first thirty-nine weeks of fiscal 2025 compared to $70.5 million, or 8.8% of net sales, for the first thirty-nine weeks of fiscal 2024.

Interest Expense

Interest expense was $1.1 million for the third quarter of fiscal 2025 compared to $0.8 million for the third quarter of fiscal 2024.

Interest expense was $2.3 million the first thirty-nine weeks of fiscal 2025 compared to $2.1 million for the first thirty-nine weeks of fiscal 2024.

Rental and Miscellaneous Expense, Net

Net rental and miscellaneous expense was $0.6 million for the third quarter of fiscal 2025 compared to $0.3 million for the third quarter of fiscal 2024 due to the departure of a tenant upon lease expiration.

Net rental and miscellaneous expense was $1.4 million for the first thirty-nine weeks of fiscal 2025 compared to $0.9 million for the first thirty-nine weeks of fiscal 2024.

Pension Expense (Excluding Service Costs)

Pension expense (excluding service costs) was $0.4 million for both the third quarter of fiscal 2025 and fiscal 2024 and $1.1 million for both the first thirty-nine weeks of fiscal 2025 fiscal 2024.

Income Tax Expense

Income tax expense was $6.0 million, or 22.9% of income before income taxes (“effective tax rate”), for the third quarter of fiscal 2025 compared to $3.4 million, or 20.2% of income before income taxes, for the third quarter of fiscal 2024. The effective tax rate is higher in the current quarter because the prior year comparable quarter contained a larger research and development tax credit.

Income tax expense was $14.3 million, or 24.0% of income before income taxes, for the first thirty-nine weeks of fiscal 2025 compared to $16.2 million, or 24.4% of income before income taxes, for the first thirty-nine weeks of fiscal 2024.

Net Income

Net income was $20.2 million, or $1.73 per common share basic and $1.72 per common share diluted, for the third quarter of fiscal 2025, compared to $13.5 million, or $1.16 per common share basic and $1.15 per common share diluted, for the third quarter of fiscal 2024.

Net income was $45.4 million, or $3.90 per common share basic and $3.87 per common share diluted, for the first thirty-nine weeks of fiscal 2025, compared to $50.2 million, or $4.33 per common share basic and $4.30 per common share diluted, for the first thirty-nine weeks of fiscal 2024.