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AUSTIN, Minn., March 2, 2023 /PRNewswire/ -- 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
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 BraisedTM, Hormel® 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
Amplify scale in snacking & entertaining
Enhance growth of our ethnic & Food Forward portfolios
Expand leadership in foodservice
Aggressively develop our global presence
Continue to transform our company
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
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
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 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
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 | ||||||
Quarter Ended | ||||||
January 29, | January 30, | % 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 | |||||
Quarter Ended | |||||
January 29, | January 30, | ||||
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 | ||||
January 29, | October 30, | |||
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 | ||||
Quarter Ended | ||||
January 29, | January 30, | |||
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 |
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SOURCE Hormel Foods Corporation