J&J Snack Foods Q2 2025: Unpacking Contradictions in Gross Margins, Theater Impacts, and Pricing Strategies

Gross margin recovery expectations, theater channel impact on frozen beverage sales, pricing and cost management, theater impact on revenue, and gross margin expectations are the key contradictions discussed in J&J Snack Foods' latest 2025Q2 earnings call.



Sales and Earnings Trends:
- J&J Snack Foods reported total net sales of $356.1 million for Q2, a 1% decline year-on-year, resulting in a 320 basis point decline in gross margin to 26.9%.
- The decline was primarily attributed to lower sales in the Frozen Beverage and Foodservice segments, partly offset by growth in the retail business.

Frozen Beverage Segment Challenges:
- The Frozen Beverage segment experienced a decline of less than 1%, affected by underperforming movie releases, unfavorable foreign exchange impacts from a weaker peso, and a 10% decline in North America box office sales.
- The segment was also negatively impacted by foreign exchange headwinds, contributing to a 60 basis point gross margin compression.

Foodservice Segment Dynamics:
- The Foodservice segment reported a 1.7% decline, mainly due to the loss of churro volume from a major QSR, impacting churro sales by 18.7%.
- While the company added new churro volumes, these did not fully offset the impact of last year's limited-time-offer, and chocolate cost inflation also contributed to a 190 basis point gross margin compression.

Retail Sales Growth:
- Retail sales grew 1.8% in Q2, driven by a 14.7% increase in frozen novelties, led by the DOGSTERS brand, which added 2.7 points of share growth.
- The growth in retail was supported by successful product launches like Dippin' Dots Sundaes and strong performances in the peak off-season.

Price Realization and Input Cost Inflation:
- The company faced challenges with input cost inflation, particularly in chocolate costs for the bakery business, which was not fully offset by incremental pricing.
- The teams are implementing selective price increases across the portfolio, with expectations to capture additional price increases in the third quarter.