AUSTIN, MINN. — Strong outcomes from Hormel Foods Corp.’s value-added companies contributed to file earnings for the corporate in the course of the first quarter of fiscal 2022 and offered an indication that Hormel is headed in the proper course with its efforts to rework its Refrigerated Foods and Jennie-O Turkey Store companies.
“From a bottom-line perspective, the intentional actions we have taken to offset inflationary pressures are working,” mentioned James P. Snee, chairman of the board, president and chief govt officer. “These actions include pricing, improving promotional effectiveness and shifting to a more profitable mix.
“We saw excellent results from the value-added businesses in Refrigerated Foods and the Jennie-O Turkey Store business, which benefited from favorable market conditions and our initial transformative efforts. The Planters business was also a catalyst for earnings growth as we continued to leverage the expertise and scale it has provided our high-growth snacking platform.”
Net earnings for the primary quarter ended Jan. 30, 2022, was $239.57 million, equal to 44¢ per share on the frequent inventory, up from $222.28 million, or 41¢ per share, within the first quarter of 2021.
During the primary quarter Hormel Foods reported file web gross sales of $3 billion, up 24% from $2.46 billion in the identical year-ago quarter.
“Organic sales increased 13% for the quarter,” mentioned Jacinth Smiley, chief monetary officer. “Gross profit increased $89 million compared to last year, a 20% increase. This improvement was driven by strength in Refrigerated Foods, Jennie-O Turkey Store and the addition of the Planters snack nuts business.”
Hormel is shifting ahead with shifting its Jennie-O Turkey Store portfolio to branded, value-added merchandise as the corporate already is seeing advantages from the technique.
“For an example, as an industry leader in turkey, we are investing behind the Jennie-O brand to drive greater growth in our most profitable, high-growth product lines in retail and foodservice,” Mr. Snee mentioned throughout an earnings name with analysts. “In conjunction with driving improvement in our value-added products, we ae also taking aggressive actions to optimize our portfolio. Combined with increased pricing, our brand investments and SKU rationalization are leading to a healthier business.”
Net gross sales for the primary quarter have been up 15% to $384.47 million. Sales elevated on account of improved foodservice efficiency, elevated complete chook shipments and pricing actions throughout the portfolio, the corporate mentioned.
Volume declined 3% largely on account of decrease commodity volumes consequently of labor shortages. Higher commodity costs and powerful foodservice gross sales drove the numerous enchancment in phase revenue, which was $43.74 million, up 62% from final yr.
The firm stays on track to shut its Benson Ave. processing plant in Willmar, Minn., and transitioning staff to the corporate’s newer and bigger facility, which is also in Willmar. The firm expects this course of to complete by the second quarter.
The Jennie-O provide chain largely has been run individually from the remaining of the corporate’s provide chain at Hormel Foods as it’s vertically built-in. Mr. Snee mentioned the corporate will leverage its One Supply Chain capabilities to combine all services into the broader Hormel community.
“As we integrate these plants into the Hormel Foods network and rationalize commodity SKUs, we will free up plant space for additional production capacity of many product lines that will service any brand in the Hormel Foods portfolio,” Mr. Snee mentioned. “This is a monumental step and one that will make our entire company more efficient.”
Mr. Snee added that the corporate expects the Jennie-O Turkey Store enterprise to realize increased or steady development and improved profitability over time.
To assist the adjustments and preserve momentum, Hormel made investments within the Jennie-O, Planters and different manufacturers.
“We increased advertising investments in all four segments to support the Planters, Spam, Jennie-O and Skippy brands as well as the Hormel pepperoni and Hormel chili product line,” Ms. Smiley mentioned. “For the quarter, advertising expense increased by 38%, or approximately 2¢ per share.”
Ms. Smiley famous that Jennie-O additionally absorbed increased logistics and provide chain prices. Feed prices jumped greater than 35% in contrast with 2021. The firm hedged most of its grain prices to guard in opposition to volatility in market costs in the course of the fiscal yr, she defined.
Mr. Snee famous that the Planters enterprise continues to carry out on the excessive finish of the corporate’s expectations, and improvements within the model are within the pipeline.
“We are on track to launch many new innovation items, including Planters Sweet & Spicy Dry Roasted peanuts, and refresh the branding and packaging,” he mentioned. “Recently, we also made investments in advertising with the All or One campaign.”
The firm additionally accomplished the provision chain integration of the Planters and Corn Nuts companies in the course of the first quarter, which ought to lead to continued synergies and improved customer support ranges.
On a phase foundation, web gross sales within the Refrigerated Foods enterprise have been $1.63 billion, a rise of 19%. Segment revenue was up 15% to $162.39 million. Sales quantity declined 4%.
“Consistent with the company’s long-term strategy to better align resources to value-added growth, the overall decline in volume was due to lower commodity sales as a result of the company’s new pork supply agreement,” the corporate mentioned.
Retail and deli gross sales development was led by merchandise corresponding to Applegate pure and natural meats and Hormel Gatherings get together trays, the corporate added. Additional merchandise corresponding to Columbus grab-and-go charcuterie additionally benefited from new manufacturing capability in Nebraska.
Net gross sales elevated 48% to $855.59 million within the Grocery Products enterprise. Segment revenue climbed 8% to $99.49 million.
Wholly, Spam, Dinty Moore and Mary Kitchen led gross sales development within the enterprise. Segment revenue elevated as a result of contribution from the Planters snack nuts enterprise, which greater than offset decrease outcomes from MegaMex and better operational and logistics prices, Hormel mentioned.
The International enterprise reported web gross sales of $176.77 million, a decline of 3%. Segment revenue declined 19% to $26.084 million.
Hormel attributed the consequence to demand softness in China brought on by COVID-related restrictions, present export logistics challenges and decrease contemporary pork export quantity ensuing from the corporate’s new pork provide settlement. Segment revenue declined on decrease gross sales throughout the portfolio and a decline in fairness in earnings.
“We are reaffirming our sales and earnings guidance,” Mr. Snee mentioned. “We expect the demand environment to remain favorable, pricing actions to combat inflationary pressures and continued growth from products such as Columbus charcuterie, Applegate natural and organic meats, Planters snack nuts, and foodservice prepared proteins and pizza toppings. Additionally, we anticipate the operating environment to remain volatile, but our supply chain will continue to show improvement as labor pressures ease and new capacity comes online to support key growth platforms, such as dry sausage, pizza toppings and bacon.”