PENNSAUKEN, NJ. — J&J Snack Foods Corp. leveraged its brands and incremental customer opportunities to “maximize every sales opportunity” during the first quarter of fiscal 2024, moves that helped the Pennsauken-based company limit its sales decline while turning in a year-over-year earnings gain, said Daniel J. Fachner, chief executive officer.

Net income at J&J Snack Foods in the first quarter ended Dec. 30, 2023, totaled $7.28 million, equal to 38¢ per share on the common stock, up 9.8% from $6.63 million, or 35¢ per share, in the same period a year ago. Net sales decreased 1% to $348.31 million from $351.34 million.

“Importantly, the success of our strategic initiatives is becoming increasingly visible,” Fachner said during a Feb. 6 conference call with analysts. “Despite softer sales, we delivered a meaningful year-over-year improvement in the overall profitability of the business, including a 20.6% increase in adjusted operating income and a 19.2% increase in adjusted EBITDA.”

Foodservice operating income at J&J Snack Foods fell 6% in the first quarter to $6.02 million from $6.39 million. Sales also were lower, falling 4.1% to $228.61 million from $238.3 million. Within the Foodservice division, sales of bakery products were $101.98 million, down 6.4% from the same quarter a year ago, while sales of churros climbed 8.9% to $28.06 million from $25.76 million. Sales of soft pretzels decreased 4.1% to $50.13 million. Sales of handhelds also fell, easing 6.5% to $22.05 million in the quarter.

Despite some of the challenges in the Foodservice division, Fachner said J&J Snack gained new business, including the launch of a jalapeño and cheese filled version of its SuperPretzel filled soft pretzel knots at a major theater customer and incremental sales gains in Pretzel bites and buns. The company also has benefited from more national fast-casual chains making pretzels a permanent part of their menu, he said.

Another highlight for the Foodservice division was a new partnership with Subway to manufacture a footlong churro for all US locations.

“This rollout began in the first quarter and is already exceeding expectations,” Fachner said, adding J&J Snack also is benefiting from the rollout of churros with a major food distributor that began in September 2023.

“They have recently doubled their original order given the strong momentum,” he said.

Fachner said J&J Snack also is leveraging innovation with flavor extensions such as the recent launch of Chocolate Filled Churro that is driving new sales opportunities.

An area of the Foodservice business that faced challenges during the quarter was bakery, where sales fell 6.4% driven entirely by the impact of reduced customer orders for pies and cookies during the holiday season.

“Many of our largest customers experienced lower traffic and moved the tighter management of inventory to manage through softer consumption trends,” Fachner said. “Looking ahead, we are focused on product innovation that drives more profitable sales while we continue rationalizing lower-performing SKUs. This strategy is helping us improve bakery gross margins while identifying new selling opportunities. On the growth front, we recently secured new cookie opportunities with several customers, introduced cakeables and seasonal cookies across a handful of partners, and we are working on opportunities to launch Pretzel Croissants and SuperPretzel Bavarian buns in the retail outlets across grocery, in-store bakery and convenience.”

In the retail supermarket segment in the first quarter, operating income was $452,000, down nearly 60% from $1.11 million in the previous year’s first quarter. Sales increased narrowly to $43.76 million from $43.07 million. Within the retail supermarket segment, sales of soft pretzels increased 27% to $18.45 million from $14.49 million. Sales of frozen novelties decreased to $12.86 million from $17.97 million, while sales of biscuits eased 11% to $7.03 million from $7.91 million. Sales of handheld items surged 91% to $5.51 million from $2.89 million.

“Bavarian sticks, a new product launched late in fiscal 2023, is now the No. 2 best seller in the SuperPretzel retail product portfolio,” Fachner said. “We also gained incremental items within our SuperPretzel portfolio across major retailers, including Publix, Stop & Shop and Woodman’s to name a few.”