HORMEL FOODS REPORTS FIRST QUARTER FISCAL 2023 RESULTS

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Hormel Foods Corporation (NYSE: HRL) reported Q1 fiscal 2023 results with net sales of $3.0 billion and diluted EPS of $0.40. Operating income stood at $289 million, with an operating margin of 9.7%. Despite strong demand for core brands like Hormel® Black Label® bacon, overall results fell short of expectations due to inflationary pressures and lower sales volumes. The company anticipates net sales growth of 1-3% for the full year and maintains EPS guidance of $1.70 to $1.82. Challenges include high inventory levels and supply chain inefficiencies, particularly in the snack nuts category and turkey supply.

Positive

• Strong demand noted for core brands, contributing to consistent revenue streams.
• Expecting net sales growth of 1-3% for fiscal 2023.
• Diluted EPS forecasted between $1.70 and $1.82, indicating stable earnings expectations.

Negative

• Q1 volume and net sales declined across all segments due to supply chain issues.
• Operational challenges in China affected revenue, contributing to a 27% profit decline in the International segment.
• Inflationary pressures and lower-than-expected sales volumes led to disappointing overall results.

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

• 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 Table^TM 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 Braised^TM, Hormel^® Bacon 1^TM 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 Table^TM 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 Table^TM 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

 

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SOURCE Hormel Foods Corporation

FAQ

What were Hormel's net sales for Q1 fiscal 2023?

Hormel Foods reported net sales of $3.0 billion for Q1 fiscal 2023.

What is Hormel's EPS guidance for fiscal 2023?

Hormel expects diluted EPS to be between $1.70 and $1.82 for fiscal 2023.

What challenges did Hormel face in Q1 fiscal 2023?

Hormel faced inflationary pressures, supply chain inefficiencies, and lower sales volumes across segments.

How did Hormel's International segment perform in Q1 fiscal 2023?

The International segment saw volume down 14% and net sales down 8%, with a 27% profit decline.

What brands performed well for Hormel in Q1 fiscal 2023?

Brands like Hormel® Black Label® bacon and Columbus® charcuterie saw strong demand during the quarter.