Βι¶ΉΣ³» (NYSE: HRL), a Fortune 500 global branded food company, today reported results for the first quarter of fiscal 2024 ending Jan. 28, 2024. All comparisons are to the first quarter of fiscal 2023 unless otherwise noted.
EXECUTIVE SUMMARY — FIRST QUARTER
- Volume of 1.1 billion lbs., up 4%
- Net sales of $3.0 billion, up 1%
- Operating income of $284 million, down 2%; adjusted operating income1 of $295 million, up 2%
- Operating margin of 9.5%, compared to 9.7% last year; adjusted operating margin1 of 9.8%
- Earnings before income taxes of $286 million, up 2%; adjusted earnings before income taxes1 of $296 million, up 5%
- Effective tax rate of 23.4%, compared to 22.6%
- Diluted net earnings per share of $0.40, comparable to last year; adjusted diluted net earnings per share1 was $0.41
- Cash flow from operations of $404 million, up 98%
EXECUTIVE COMMENTARY & OUTLOOK
“We delivered strong results in the first quarter, led by better-than-expected performance in each of our business segments and progress against our transformation and modernization initiative,” said Jim Snee, chairman of the board, president and chief executive officer. “We are especially encouraged by broad-based volume growth across our businesses, reflecting the strength of our leading brands, robust demand for our foodservice products and momentum in our Planters® snack nuts business. These results demonstrate our team’s meaningful execution against our strategic priorities, the value of our balanced business model and marked improvements in our supply chain.”
“We are reaffirming our full-year net sales and earnings expectations,” Snee said. “We expect continued growth in Foodservice, improvement in our International business, impacts from pricing and innovation in Retail, and further progress on our transformation and modernization initiative. Our teams remain focused on our strategic priorities and delivering on our commitment to improve our business and drive long-term shareholder returns.”
For fiscal year 2024, the Company is:
- Reaffirming its net sales growth outlook of 1% to 3%, which assumes volume growth in key categories, higher brand support and innovation, impacts from incremental pricing actions and its current assumptions for raw material input costs.
- Reaffirming its diluted net earnings per share and adjusted diluted net earnings per share1 expectations of $1.43 to $1.57, and $1.51 to $1.65,* respectively. Diluted net earnings per share and adjusted diluted net earnings per share1 are expected to decline year over year in the second quarter and grow in the back half of the year. The full-year outlook reflects a significant year-over-year decline in whole bird turkey markets.
- Assuming a modest benefit to net earnings from its transformation and modernization initiative.
| Fiscal 2024 Outlook | |
| Net Sales | $12.2 - $12.5 billion |
| Adj. Diluted Net Earnings per Share* | $1.51 - $1.65 |
| Effective Tax Rate | 21.0 - 23.0% |
*Adjusted diluted net earnings per share1 excludes the estimated impact of $0.08 per share from nonrecurring costs associated with the Company’s transformation and modernization initiative. Please see discussion of non-GAAP financial measures and a reconciliation of the Company’s fiscal year 2024 guidance for estimated adjusted diluted net earnings per share1 at the end of this release.
PROGRESS EXECUTING STRATEGIC PRIORITIES – Q1 HIGHLIGHTS
Drive focus and growth in our Retail business
- We delivered volume and sales growth in the marketplace for Skippy® peanut butter, Hormel® Square Table™ entrees, Chi-Chi’s® salsa, Hormel® Natural Choice® bacon, Herdez® guacamole and Corn Nuts® corn kernels.2
- We grew retail volume and sales of Jennie-O® turkey items during the quarter, including above-category performance in the fresh ground turkey category.3
- The Applegate® brand drove sales growth in many natural and organic channel categories for the quarter, including in sliced deli meats, breakfast sausage, breaded chicken, bacon and hot dogs.4
Expand leadership in Foodservice
- We delivered strong volume and net sales growth, driven by categories such as premium bacon, premium prepared proteins, poultry and snacking.5
- We launched three items, including:
- Hormel® Flash 180™ sous vide-style chicken breast: creating easy to-prepare, consistent fried chicken that helps increase productivity and profitability without compromising flavor or value.
- Café H® pork Al Pastor: lightly smoked and seasoned pork with chipotle peppers, guajillo peppers and achiote spice — sliced to replicate the “off-the-spit style.”
- Hormel® ribbon pepperoni: capitalizing on our leadership position in pizza toppings.
- Our Foodservice team was awarded the International Foodservice Distributor Association’s Distributor Choice: Strategic Partner award in January 2024, which recognized our team as the most strategic partner out of more than 70 manufacturers across the foodservice landscape.
Aggressively develop our global presence
- We continued to expand export sales of Hormel® Bacon 1™ cooked bacon to foodservice operators around the world, achieving rapid growth in Canada and Australia.5
- We expect to launch Skippy® peanut butter wafer cones and Skippy® peanut butter mini ball snacks in Indonesia. This marks our first branded entry into Indonesia through our partnership with Garudafood, advancing the global execution of our entertaining and snacking strategy.
Execute our enterprise entertaining & snacking vision
- Net sales increased during the quarter within the snacking and entertaining vertical in our Retail segment, driven by higher net sales of Planters® snack nuts, Corn Nuts® corn kernels and Hormel® pepperoni.5
- We maintained positive volume and dollar share6 momentum in our Planters® snack nuts business once again during the first quarter, along with increasing our points of distribution6 and household penetration.7 We are building on this momentum with the planned second quarter launch of Planters® Nut Duos and an extension to our flavored-cashews line. In addition, we are supporting the brand with “Ahhh, nuts,” a new nationwide advertising campaign.
Future-fit our One Supply Chain/Continue to transform & modernize our Company
- We made progress against our transformation and modernization initiative, including in the areas of supply chain efficiency and portfolio optimization:
- Plan: We are implementing a new end-to-end planning process and are integrating new planning technology.
- Buy: We are realizing the benefits from our new procurement and productivity programs, with further savings expected across many categories, such as logistics and warehousing, direct supplies and indirect supplies.
- Make: We launched the Hormel Production System to standardize our ways of working across our manufacturing network.
- Move: We are taking actions to optimize our refrigerated and ambient distribution networks.
- Portfolio Optimization: We have identified approximately 10% of the items in our portfolio to be optimized. Throughout the year, we expect to use our enhanced data and analytics capabilities to identify more opportunities to improve our portfolio.
- We formed a data and analytics office, focused on creating easy access to reliable and consistent technology, data and analytics to support our transformation and modernization initiative.
SEGMENT HIGHLIGHTS – FIRST QUARTER
Retail
- Volume up 2%
- Net sales down 2%
- Segment profit down 3%
Volume growth for the quarter was driven by the value-added meats, global flavors, emerging brands and bacon verticals. Net sales declined primarily due to lower contract manufacturing volume and lower commodity turkey pricing. Demand was strong for many products, including Skippy® peanut butter, Planters® snack nuts, Wholly® dips, Herdez® salsas and sauces, La Victoria® salsas, Jennie-O® ground turkey, Hormel® Square Table™ entrees and Hormel® pepperoni, which each delivered volume and net sales improvement during the quarter. Segment profit declined, as the benefit from higher sales in our snacking and entertaining vertical and lower logistics expenses was more than offset by the impact from lower commodity turkey pricing and lower equity in earnings from MegaMex Foods.
Foodservice
- Volume up 8%
- Net sales up 9%
- Segment profit up 10%
Volume and net sales growth were broad based across numerous categories, led by Jennie-O® turkey and double-digit gains for products such as Hormel® Bacon 1™ cooked bacon, pepperoni, Austin Blues® smoked meats and Café H® globally inspired proteins. Additionally, the Company’s Heritage Premium Meats group drove strong volume and double-digit net sales improvement for the quarter. Segment profit increased primarily due to higher sales and favorable logistics expenses.
International
- Volume up 11%
- Net sales down 3%
- Segment profit up 1%
Higher commodity exports led to volume gains for the quarter. Net sales declined due to lower branded export sales and lower sales in China. Also in China, foodservice results improved as we lapped COVID-related disruption last year. This benefit was more than offset by continued weakness in the retail channel. Segment profit increased due to the inclusion of our investment in Indonesia and significantly higher results from our partnership in the Philippines, which offset the impact from lower branded export demand and lower sales in China.
SELECTED FINANCIAL DETAILS – FIRST QUARTER AND FISCAL 2024
- Advertising investments were $44 million, compared to $47 million last year. The Company expects full-year advertising expense to increase compared to the prior year.
- The effective tax rate was 23.4%, compared to 22.6% last year. The Company benefited from the impact of certain discrete items and higher federal deductions last year.
- Capital expenditures were $47 million, compared to $37 million last year. The Company’s target for capital expenditures in fiscal 2024 is $280 million.
- Depreciation and amortization expense was $64 million, compared to $62 million last year. The full-year expense for fiscal 2024 is expected to be approximately $250 million.
PRESENTATION
A conference call will be webcast at 8 a.m. CST on Feb. 29, 2024. Access is available at www.hormelfoods.com by clicking on “Investors.” The call will also be available via telephone by dialing 800-549-8228 (toll-free) or 646-564-2877 (international) and providing the conference ID 01317. An audio replay is available by going to www.hormelfoods.com. The webcast replay will be available at noon CST, Feb. 29, 2024, and will remain on the website for one year.