Hormel reports strong demand for Herdez products in Q1; company to grow cultural foods portfolio, as MegaMex brand grew, maintained dollar, volume share in salsa, refrigerated guacamole categories with Herdez, WHOLLY, CHI-CHI'S and La Victoria brands

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AUSTIN, Minnesota , March 16, 2023 (press release) –

 

Hormel Foods Corporation (NYSE: HRL), a Fortune 500 global branded food company, today reported results for the first quarter of fiscal 2023. Effective Oct. 31, 2022 , the Company transitioned to three operating segments – Retail, Foodservice and International. The Company provided recast financial information for fiscal years 2021 and 2022 via a Form 8-K filed with the U.S. Securities and Exchange Commission on Feb. 28, 2023 . All comparisons are to the first quarter of fiscal 2022 unless otherwise noted.

EXECUTIVE SUMMARY - FIRST QUARTER

  • Net sales of $3.0 billion
  • Operating income of $289 million
  • Operating margin of 9.7%
  • Earnings before income taxes of $281 million
  • Effective tax rate of 22.6%
  • Diluted net earnings per share of $0.40
  • Cash flow from operations of $204 million

EXECUTIVE COMMENTARY
"The operating environment at the beginning of fiscal 2023 remained challenging," said Jim Snee , chairman of the board, president and chief executive officer. "While many areas of the business performed ahead of last year, our results were disappointing and below our expectations, reflecting the persistent impact from inflationary pressures, supply chain inefficiencies and lower-than-expected sales volumes across our business segments."

"In general, demand from consumers and operators remains elevated in key categories, and we are delivering balanced growth between volume and price across many parts of our portfolio," Snee said. "Specific to the first quarter, our top-line results were mixed. We continued to see strong demand for many of our center-store, refrigerated, Mexican and premium items at retail, including Hormel ® Black Label® bacon, Columbus ® charcuterie, Hormel ® chili, Hormel ® pepperoni, Applegate® breaded chicken, Herdez® products, Hormel ® Square TableTM entrees and Mary Kitchen ® hash. Likewise, solutions-based items in our Foodservice segment had another strong quarter, with volume growth in sliced meats and from brands such as Cafe H ®Hormel ® Fire BraisedTMHormel ® Bacon 1TM and Austin Blues®. These gains, however, were offset by the planned volume declines in commodity pork, continued volume impacts across our turkey supply chain, and lower sales of snack nuts. Our team in China also faced incredibly difficult operating conditions throughout the quarter."  

OUTLOOK
"We remain well positioned in the retail, foodservice and international channels, and expect to drive net sales growth in each of our segments this year," Snee said. "Demand for our leading retail brands remains favorable, our Foodservice segment expects strong growth for the remainder of the year, and we anticipate the near-term challenges for our International segment to abate over the coming months. Compared to our expectations heading into the year, earnings are being pressured by increased inefficiencies across our supply chain related to higher inventory levels and softness in the snack nuts category."

"To address these challenges, our teams will be focused on three areas," Snee said. "First, we are taking immediate action to combat inventory levels and warehousing costs. These actions are expected to result in short-term margin compression. Second, we will execute strategies to drive improvement for our Planters® business and the snack nuts category, including optimizing brand and promotional support, introducing innovation and expanding assortments. Third, we will continue to implement our new operating model, GoFWD, including capturing the synergies from fully integrating our Jennie-O Turkey Store business and standing up our Brand Fuel center of excellence. Our new operating model should better enable improved business performance as the year progresses."

For the full year, the Company expects net sales growth of 1-3% compared to last year, consistent with its previous guidance. Full-year diluted net earnings per share are now expected to be $1.70 to $1.82 per share. Additionally, the Company is reaffirming its previously communicated expectations for effective tax rate, depreciation and amortization, and capital expenditures.

UPDATE ON STRATEGIC PRIORITIES
Protect & grow our core brands

  • We grew volume and sales in the marketplace1 on many core product lines, including Hormel ® chili, Hormel ® Square TableTM entrees, Dinty Moore ® stew and Hormel ® Black Label® bacon.
  • We are benefiting from additional capacity for our core bacon and pepperoni products and expect additional SPAM® capacity beginning in the second quarter. We expect to reintroduce 7-ounce SPAM® into the marketplace after a three-year hiatus.

Amplify scale in snacking & entertaining

  • The Planters® brand launched the ad campaign The Roast of Mr. Peanut® during the Big Game, including a 30-second ad during the game and a 12-minute online feature. The campaign has garnered more than 2.5 billion earned impressions.2
  • The Columbus ® brand maintained share during the quarter1 and remains in the No. 1 dollar and volume share1 position in the dry deli lunchmeat category.

Enhance growth of our ethnic & Food Forward portfolios

  • The MegaMex team grew or maintained dollar and volume share3 in the salsa and refrigerated guacamole categories behind the Herdez®, WHOLLY®, CHI-CHI'S® and La Victoria ® brands.
  • Our Applegate® products grew dollar sales 6% in the most recent quarter.4

Expand leadership in foodservice

  • We recently invested in our Culinary Collective, an effort to centralize and leverage our talented culinary teams across the organization to bring Food Forward and innovative ideas to the marketplace. This group is driving new sales opportunities and highlighting the versatility and value of our foodservice products with customers and operators.
  • Over the last year, the Corn Nuts® brand has grown sales double-digits by increasing distribution across channels.5 Consistent with our focus on innovation, we are launching a new flavor variety, Corn Nuts® Mexican Style Street Corn, in the second quarter.

Aggressively develop our global presence

  • In December, we purchased approximately 29% of the shares of Garudafood, one of the largest food and beverage companies in Indonesia . This investment further supports the global execution of our snacking and entertaining strategic priority.

Continue to transform our company

  • We transitioned to our new strategic operating model, GoFWD, on Oct. 31, 2022 .
  • We made significant progress toward fully integrating Jennie-O Turkey Store into the Company's One Supply Chain and new operating segments.

SEGMENT HIGHLIGHTS – FIRST QUARTER
Prior-period segment results have been retrospectively recast to reflect the new reportable segments. The Company provided unaudited recast financial information for fiscal years 2021 and 2022 via a Form 8-K filed on Feb. 28, 2023 .

Volume and net sales declined for each segment for the first quarter of fiscal 2023 due to lower fresh pork availability resulting from the Company's new pork supply agreement and lower turkey volumes due to the ongoing impacts of highly pathogenic avian influenza (HPAI) in the Company's vertically integrated turkey supply chain.

Retail

  • Volume down 13%
  • Net sales down 2%
  • Segment profit down 9%

Net sales growth from the bacon, global flavors, convenient meals and proteins, and emerging brands verticals was offset by lower sales in the value-added meats, and snacking and entertaining verticals. Net sales increased for products such as Hormel ® Black Label® bacon, Columbus ® charcuterie, Hormel ® chili, Herdez® salsa and sauces, Hormel ® Square TableTM entrees and Mary Kitchen ® hash. Lower sales of snack nuts and peanut butter offset a majority of these gains. Segment profit declined due to the impact from lower net sales, unfavorable mix and higher operating costs, partially offset by the benefit from pricing actions across the portfolio, higher equity in earnings from MegaMex and improved results for the bacon business.

Foodservice

  • Volume down 6%
  • Net sales down 2%
  • Segment profit up 1%

Products in the sliced meats, pepperoni, premium prepared proteins, and premium bacon and breakfast sausage categories grew volume and net sales for the quarter. Net sales declines can be partially attributed to lower net pricing reflecting commodity relief in certain categories. Segment profit increased due to improved mix across the portfolio.

International

  • Volume down 14%
  • Net sales down 8%
  • Segment profit down 27%

Volume and net sales growth from our branded exports, including the SPAM® and SKIPPY® brands, and improved results in Brazil , were partially offset by lower sales in China due to ongoing COVID-related disruption. Segment profit declined, as strong results from our joint venture in the Philippines did not overcome significantly lower turkey and fresh pork export sales, lower sales in China and elevated logistics expenses.

SELECTED FINANCIAL DETAILS

  • Advertising spend was $47 million , comparable with last year.
  • The effective tax rate was 22.6%, compared to 22.4% for the previous year. The effective tax rate for fiscal 2023 is expected to be between 21.0% and 23.0%.
  • Capital expenditures in the first quarter were $37 million , compared to $50 million last year. The Company's target for capital expenditures in fiscal 2023 is $350 million .
  • Depreciation and amortization expense in the first quarter was $71 million , compared to $64 million last year. The full-year expense is expected to be approximately $285 million .

PRESENTATION
A conference call will be webcast at 8:30 a.m. CST on Mar. 2, 2023 . Access is available at www.hormelfoods.com by clicking on "Investors." The call will also be available via telephone by dialing 888-396-8049 (toll-free) or 416-764-8646 (international). An audio replay is available by going to www.hormelfoods.com. The webcast replay will be available at noon CST , Mar. 2, 2023 , and will remain on the website for one year.

ABOUT HORMEL FOODS - Inspired People. Inspired Food.™
Hormel Foods Corporation , based in Austin, Minn. , is a global branded food company with over $12 billion in annual revenue across more than 80 countries worldwide. Its brands include Planters®SKIPPY®, SPAM®, Hormel ® Natural Choice®, Applegate®, Justin's®, WHOLLY®, Hormel ® Black Label®, Columbus ®Jennie-O® and more than 30 other beloved brands. The Company is a member of the S&P 500 Index and the S&P 500 Dividend Aristocrats, was named on the "Global 2000 World's Best Employers" list by Forbes magazine for three years, is one of Fortune magazine's most admired companies, has appeared on the "100 Best Corporate Citizens" list by 3BL Media 13 times, and has received numerous other awards and accolades for its corporate responsibility and community service efforts. The Company lives by its purpose statement — Inspired People. Inspired Food.™ — to bring some of the world's most trusted and iconic brands to tables across the globe. For more information, visit www.hormelfoods.com.

FORWARD-LOOKING STATEMENTS
This news release contains "forward-looking" information within the meaning of the federal securities laws. The "forward-looking" information may include statements concerning the Company's outlook for the future as well as other statements of beliefs, future plans, strategies, or anticipated events and similar expressions concerning matters that are not historical facts. Words or phrases such as "should result," "believe," "intend," "plan," "are expected to," "targeted," "will continue," "will approximate," "is anticipated," "estimate," "project," or similar expressions are intended to identify forward-looking statements. Such statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those anticipated or projected, which factors include, but are not limited to, risks related to the deterioration of economic conditions; the COVID-19 pandemic; risks associated with acquisitions and divestitures; potential disruption of operations including at co-manufacturers, suppliers, logistics providers, customers, or other third-party service providers; risk of loss of a material contract; the Company's inability to protect information technology systems against, or effectively respond to, cyber attacks or security breaches; deterioration of labor relations, labor availability or increases to labor costs; general risks of the food industry, including food contamination; outbreaks of disease among livestock and poultry flocks; fluctuations in commodity prices and availability of raw materials and other inputs; fluctuations in market demand for the Company's products; damage to the Company's reputation or brand image; climate change, or legal, regulatory, or market measures to address climate change; risks of litigation; potential sanctions and compliance costs arising from government regulation; compliance with stringent environmental regulation and potential environmental litigation; and risks arising from the Company's foreign operations. Please refer to the cautionary statements regarding "Risk Factors" and "Forward-Looking Statements" that appear in our most recent Annual Report on Form 10-K and Quarterly reports on Form 10-Q, which can be accessed at www.hormelfoods.com in the "Investors" section, for additional information. In making these statements, the Company is not undertaking, and specifically declines to undertake, any obligation to address or update each or any factor in future filings or communications regarding the Company's business or results, and is not undertaking to address how any of these factors may have caused changes to discussions or information contained in previous filings or communications. Though the Company has attempted to list comprehensively these important cautionary risk factors, the Company wishes to caution investors and others that other factors may in the future prove to be important in affecting the Company's business or results of operations. The Company cautions readers not to place undue reliance on forward-looking statements, which represent current views as of the date made.

Note: Due to rounding, numbers presented throughout this news release may not sum precisely to the totals provided, and percentages may not precisely reflect the absolute figures.

END NOTES
1IRI panel, Total US All Outlet , volume and dollar sales for 13 weeks ended 1/29/2023
2Per ICF Next research
3IRI Market Advantage, Total US MULO, 13 weeks ending 1/22/2023
4NielsenIQ Discover, Total US xAOC, dollar sales for 12 weeks ended 1/28/2023
5IRI Market Advantage, Total US MULO + Convenience, 52 weeks ending 1/22/2023

 

HORMEL FOODS CORPORATION
SEGMENT DATA
In thousands
Unaudited

 
   

Quarter Ended

   

January 29 ,
2023

 

January 30 ,
2022

 

% Change

Volume (lbs.)

           

Retail

 

752,887

 

868,939

 

(13.4)

Foodservice

 

237,087

 

252,249

 

(6.0)

International

 

72,237

 

83,684

 

(13.7)

Total

 

1,062,211

 

1,204,872

 

(11.8)

             

Net Sales

           

Retail

 

$       1,957,797

 

$       1,995,896

 

(1.9)

Foodservice

 

834,750

 

854,194

 

(2.3)

International

 

178,445

 

194,268

 

(8.1)

Total

 

$       2,970,992

 

$       3,044,358

 

(2.4)

             

Segment Profit

           

Retail

 

$          154,677

 

$          169,702

 

(8.9)

Foodservice

 

136,442

 

134,758

 

1.2

International

 

19,905

 

27,239

 

(26.9)

Total Segment Profit

 

311,025

 

331,699

 

(6.2)

Net Unallocated Expense

 

29,755

 

22,933

 

29.7

Noncontrolling Interest

 

(69)

 

139

 

(149.4)

Earnings Before Income Taxes

 

$          281,201

 

$          308,904

 

(9.0)

 

HORMEL FOODS CORPORATION
CONSOLIDATED STATEMENTS OF OPERATIONS
In thousands, except per share amounts
Unaudited

 
   

Quarter Ended

 
   

January 29 ,
2023

 

January 30 ,
2022

 

Net Sales

 

$   2,970,992

 

$   3,044,358

 

Cost of Products Sold

 

2,475,043

 

2,505,610

 

Gross Profit

 

495,949

 

538,749

 

Selling, General, and Administrative

 

222,056

 

225,972

 

Equity in Earnings of Affiliates

 

15,559

 

6,898

 

Operating Income

 

289,452

 

319,675

 

Interest and Investment Income

 

10,096

 

3,869

 

Interest Expense

 

18,347

 

14,640

 

Earnings Before Income Taxes

 

281,201

 

308,904

 

Provision for Income Taxes

 

63,551

 

69,194

 

Effective Tax Rate

 

22.6 %

 

22.4 %

 

Net Earnings

 

217,651

 

239,710

 

Less: Net Earnings (Loss) Attributable to Noncontrolling Interest

 

(69)

 

139

 

Net Earnings Attributable to Hormel Foods Corporation

 

$      217,719

 

$      239,571

 
           

Net Earnings Per Share:

         

Basic

 

$            0.40

 

$            0.44

 

Diluted

 

$            0.40

 

$            0.44

 
           

Weighted-average Shares Outstanding:

         

Basic

 

546,384

 

542,680

 

Diluted

 

550,031

 

547,928

 
           

Dividends Declared per Share

 

$        0.2750

 

$        0.2600

 

 

HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF FINANCIAL POSITION
In thousands
Unaudited

 
   

January 29 ,
2023

 

October 30 ,
2022

Assets

Cash and Cash Equivalents

 

$           599,789

 

$           982,107

Short-term Marketable Securities

 

17,792

 

16,149

Accounts Receivable

 

787,213

 

867,593

Inventories

 

1,730,086

 

1,716,059

Taxes Receivable

 

7,145

 

7,177

Prepaid Expenses and Other Current Assets

 

53,281

 

48,041

Total Current Assets

 

3,195,306

 

3,637,125

         

Goodwill

 

4,927,923

 

4,925,829

Other Intangibles

 

1,798,732

 

1,803,027

Pension Assets

 

242,358

 

245,566

Investments In and Receivables from Affiliates

 

701,629

 

271,058

Other Assets

 

292,697

 

283,169

Net Property, Plant, and Equipment

 

2,124,402

 

2,141,146

Total Assets

 

$      13,283,047

 

$      13,306,919

         
         

Liabilities and Shareholders' Investment

Accounts Payable and Accrued Expenses

 

$           764,525

 

$           875,405

Accrued Marketing Expenses

 

133,240

 

113,105

Employee Related Expenses

 

213,540

 

279,072

Interest and Dividends Payable

 

158,376

 

163,963

Taxes Payable

 

94,775

 

32,925

Current Maturities of Long-term Debt

 

8,929

 

8,796

Total Current Liabilities

 

1,373,385

 

1,473,266

         

Long-term Debt Less Current Maturities

 

3,292,559

 

3,290,549

Pension and Post-retirement Benefits

 

389,423

 

385,832

Deferred Income Taxes

 

471,457

 

475,212

Other Long-term Liabilities

 

137,230

 

141,840

Accumulated Other Comprehensive Loss

 

(252,261)

 

(255,561)

Other Shareholders' Investment

 

7,871,254

 

7,795,780

Total Liabilities and Shareholders' Investment

 

$      13,283,047

 

$      13,306,919

 

HORMEL FOODS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
In thousands
Unaudited

 
   

Quarter Ended

   

January 29 ,
2023

 

January 30 ,
2022

Operating Activities

       

Net Earnings

 

$      217,651

 

$      239,710

Depreciation and Amortization

 

70,893

 

64,280

Decrease (Increase) in Working Capital

 

(67,564)

 

54,382

Other

 

(17,351)

 

25,384

Net Cash Provided by (Used in) Operating Activities

 

203,629

 

383,756

         

Investing Activities

       

Net (Purchase) Sale of Securities

 

(833)

 

(1,611)

Net Purchases of Property and Equipment

 

(32,036)

 

(49,359)

Decrease (Increase) in Investments, Equity in Affiliates, and Other Assets

 

(418,616)

 

1,290

Other

 

16

 

Net Cash Provided by (Used in) Investing Activities

 

(451,469)

 

(49,680)

         

Financing Activities

       

Repayments of Long-term Debt and Finance Leases

 

(2,189)

 

(2,163)

Dividends Paid on Common Stock

 

(142,017)

 

(132,909)

Other

 

2,635

 

11,053

Net Cash Provided by (Used in) Financing Activities

 

(141,570)

 

(124,019)

Effect of Exchange Rate Changes on Cash

 

7,093

 

846

Increase (Decrease) in Cash and Cash Equivalents

 

(382,318)

 

210,904

Cash and Cash Equivalents at Beginning of Year

 

982,107

 

613,530

Cash and Cash Equivalents at End of Quarter

 

$      599,789

 

$      824,434

 

INVESTOR CONTACT:

David Dahlstrom

(507) 437-5248

ir@hormel.com

 

MEDIA CONTACT:

Media Relations

(507) 437-5345

media@hormel.com

 

 

 View original content to download multimedia:https://www.prnewswire.com/news-releases/hormel-foods-reports-first-quarter-fiscal-2023-results-301760367.html

SOURCE Hormel Foods Corporation

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