Exclusive: J&J Snack Foods CEO sees a leaner business set up to return to growth

J&J Snack Foods CEO Dan Fachner discusses the company's transition to a leaner business model, aiming to return to growth. Despite a 6.2% drop in Q3 sales to $426 million, the company managed to grow its gross profit by about $1 million to $151 million and expand gross margins by 240 basis points to 35.5%, according to Fachner. J&J Snack Foods is implementing Project Apollo, a broad efficiency initiative, which is projected to generate $25 million in annualized savings, exceeding an earlier $20 million target.

This efficiency drive is helping to protect margins and provide the company with a buffer against rising material, freight, and fuel costs. As planned bakery volume reductions wind down in Q4, J&J expects them to be largely behind them heading into fiscal 2027. Retail sales increased by 1.7% in the quarter, although Fachner notes it understates the underlying performance.

The company attributes this growth to promotions and increased volumes, particularly in smaller and newer growth businesses like Dogsters, Luigi's, and Dippin' Dots. J&J's familiar brands are a significant advantage, and the company is focusing on expanding its presence in categories where it already has an advantage. Higher fuel and freight expenses remain a challenge for J&J, but the company expects pressure to continue into Q4.

To mitigate these costs, J&J Snack Foods has used tools like surcharges and minimum-order increases, while also benefiting from efficiency gains from Project Apollo. The company has returned approximately $120 million to shareholders this year through dividends and buybacks while continuing to invest in its operations and evaluate potential acquisitions.

J&J aims to optimize its plant footprint and explore M&A opportunities with businesses that complement its existing portfolio naturally. Fachner expressed optimism about J&J's future, citing strong savings from Project Apollo, fading bakery headwinds, and the company's ongoing growth in core businesses and new channels.