Smucker’s Value Positioning Leads to Strong Q2 Results, but Shares Appear Fairly Valued

In its fiscal second quarter, Smucker reported 11% organic sales growth (a 17% boost from higher prices partially offset by a 6% drop in volume/mix), topping our 8% forecast. While Smucker’s meaningful exposure to value brands has resulted in market share losses in recent years as consumers traded up to premium offerings, we think this positioning is boosting Smucker’s performance in the current inflationary environment as consumers are more price sensitive. The firm touted that 71% of its sales in the U.S. retail channel are gaining or maintaining share, which we largely attribute to its value positioning. However, we continue to believe that Smucker’s brands largely lack brand equity, which underpins our no-moat rating.