Βι¶ΉΣ³» (NYSE: HRL), a Fortune 500 global branded food company, today reported results for the third quarter of fiscal 2024, ended July 28, 2024. All comparisons are to the comparable period of fiscal 2023, unless otherwise noted.
EXECUTIVE SUMMARY — THIRD QUARTER
- Volume of 1.02 billion lbs.
- Net sales of $2.90 billion
- Operating income of $237 million; adjusted operating income1 of $267 million
- Operating margin of 8.2%; adjusted operating margin1 of 9.2%
- Earnings before income taxes of $226 million; adjusted earnings before income taxes1 of $256 million
- Effective tax rate of 21.7%
- Diluted net earnings per share of $0.32; adjusted diluted net earnings per share1 of $0.37
- Cash flow from operations of $218 million
EXECUTIVE COMMENTARY AND OUTLOOK
“We delivered solid third-quarter results and another quarter of better-than-expected earnings.” said Jim Snee, chairman of the board, president and chief executive officer. “Many of our key retail brands are growing, outperforming their categories and, most importantly, resonating with our customers and consumers. Our Foodservice business continued to deliver above-industry growth, highlighting the importance of our solutions-based portfolio, direct selling team, and diverse customer and operator base. We again experienced significant recovery in our International segment, led by our global brands. Lastly, we continued to realize growing benefits from our transform and modernize initiative, creating impactful improvements across our supply chain.”
“Our team remains focused on finishing the year strong and executing on our strategic priorities,” said Snee. “In the fourth quarter, we expect continued momentum across many of our key retail brands, growth within our Foodservice and International businesses, improved service levels for the Planters® snack nuts business, and further advancements of our transform and modernize initiative.”
For fiscal year 2024, the Company is:
- Updating its net sales range expectations to $11.8 billion to $12.1 billion, reflecting lower-than expected commodity markets, production disruptions at its Suffolk, Virginia, facility, and declines in its contract manufacturing business.
- Narrowing its expected diluted net earnings per share range to $1.45 to $1.51 (previously $1.45 to $1.55) and its adjusted diluted net earnings per share1 range to $1.57 to $1.63* (previously $1.55 to $1.65).
- Including an updated estimate of $0.06 per share impact related to production disruptions at its Suffolk, Virginia, facility. Furthermore, the Company is assessing the financial impact related to storm damage at its Papillion, Nebraska, facility.
- Assuming continued benefits to net earnings from its transform and modernize initiative.
| Fiscal 2024 Outlook | Current | Previous |
| Net Sales | $11.8 - $12.1 billion | $12.2 - $12.5 billion |
| Adj. Diluted Net Earnings per Share* | $1.57 - $1.63 | $1.55 - $1.65 |
| Effective Tax Rate | 22.0 - 23.0% | 22.0 - 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 transform and modernize initiative and approximately $0.04 per share resulting from legal settlements. Please see discussion of non-GAAP 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 – Q3 HIGHLIGHTS
Drive focus and growth in our Retail business
- We grew volume and dollar sales2,3 for many products during the quarter, including Skippy® peanut butter, Jennie-O® lean ground turkey, Applegate® natural and organic meats, Wholly® and Herdez® guacamole, Lloyd’s® barbecue items and Corn Nuts® corn kernels.
- Hormel® Black Label® bacon achieved strong results during the quarter, growing volume, dollar sales, and household penetration.2,4
- We introduced SPAM® Korean BBQ Flavored, our latest flavor innovation in the SPAM® family of products. This is the brand’s 12th permanent variety and is aimed at loyal SPAM® fans and the next generation of consumers.
Expand leadership in Foodservice
- We again delivered a strong quarter of volume and net sales growth, led in part by Hormel® Bacon 1™ cooked bacon, premium prepared proteins and Jennie-O® turkey items.
- Premium prepared proteins continue to offer solutions-based options to our operators. Our newest items — Hormel® Flash 180™ sous vide-style chicken breast and Hormel® Fire Braised™ loin back ribs — both contributed growth this quarter.
- We continued to experience strong customer acceptance for Hormel® ribbon pepperoni in the quarter, another example of the innovation that our Foodservice team brings to the marketplace.
Aggressively develop our global presence
- Innovation continues to be key to our international growth strategy. We launched new snacking innovation in China during the quarter, supporting our retail recovery.
- We expanded distribution in the South Korean market through Skippy® product offerings.
- SPAM® luncheon meat delivered a second consecutive quarter of double-digit top-line growth5 with strong shipments to Canada, Southeast Asia and Japan.
Execute our enterprise entertaining & snacking vision
- We launched the Planters® Nut Duos Duo-licious advertising campaign and this new product offering is attracting younger consumers to the snack nuts category.4
- We grew household penetration4 for Hormel® pepperoni, America’s No. 1 pepperoni brand,2 reflecting its continued relevance to consumers.
Future-fit our One Supply Chain/Continue to transform & modernize our Company
- We made further progress across all pillars (Plan, Buy, Make, Move, and Portfolio Optimization) of our transform and modernize initiative, notably:
- Plan: We continued the implementation of a new end-to-end planning process and technology and are improving inventory management practices.
- Make: We continued to generate improved operational results in our manufacturing facilities, unlocking production capacity and generating cost savings across our network.
- We published our 2023 Global Impact Report, a comprehensive update on our 20 By 30 Challenge. The report demonstrates the Company’s ongoing commitment to corporate responsibility.
SEGMENT HIGHLIGHTS – THIRD QUARTER
Retail
- Volume down 9%
- Net sales down 7%
- Segment profit down 15%
Volume and net sales declined, primarily due to significant year-over-year volume and pricing declines for whole bird turkeys, lower sales of Planters® snack nuts resulting from production disruptions at the Suffolk, Virginia, facility, and lower center-store and contract manufacturing volumes. Partially offsetting these declines were net sales growth for many key brands, including Hormel® Black Label® bacon, Applegate® natural and organic meats, Jennie-O® ground turkey, Skippy® peanut butter, Wholly® guacamole, Herdez® salsas and sauces, and Hormel® Square Table™ entrees. Segment profit declined, as the benefit from lower logistics expenses and savings from the transform and modernize initiative were more than offset by the impact of lower net sales.
Foodservice
- Volume up 2%
- Net sales up 7%
- Segment profit down 3%
Volume and net sales growth were driven primarily by strong performance across the turkey, premium prepared proteins, bacon and pepperoni categories. Notable products such as Hormel® Fire Braised™ meats, Hormel® Bacon 1™ cooked bacon, Café H® globally inspired proteins and Rosa Grande® premium pepperoni delivered strong volume and net sales growth. Growth from branded Jennie-O® turkey items continue to benefit top-line results. Segment profit decreased in the current quarter, as higher sales were more than offset by higher SG&A expenses.
International
- Volume down 13%
- Net sales down 2%
- Segment profit up 78%
Robust volume and net sales growth for SPAM® luncheon meat, refrigerated foodservice exports, and Skippy® peanut butter exports were more than offset by the difficult comparison in the prior year to higher export volumes of low-margin commodity fresh pork and turkey. Segment profit increased significantly in the current quarter, driven by improved export margins, growth from our investments in the Philippines and Indonesia, and favorable costs in China.
SELECTED FINANCIAL DETAILS – THIRD QUARTER FISCAL 2024
- Advertising investments were $40 million, compared to $43 million last year. The decline is partially due to lower support for the Planters® brand due to production disruptions at the Suffolk, Virginia, facility. The Company expects full-year advertising expense to increase compared to the prior year.
- The effective tax rate was 21.7%, even with last year. The effective tax rate for fiscal 2024 is expected to be between 22.0% and 23.0%.
- Capital expenditures were $65 million, compared to $78 million last year. The Company’s target for capital expenditures in fiscal 2024 is $280 million.
- Depreciation and amortization expense was $64 million, even with last year. The full-year expense for fiscal 2024 is expected to be approximately $250 million.
- The third quarter marked the 96th year of uninterrupted dividends paid to stockholders. The Company returned approximately $155 million to stockholders during the quarter.
PRESENTATION
A conference call will be webcast at 8 a.m. CT on Sep. 4, 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 99159. An audio replay is available at www.hormelfoods.com. The webcast replay will be available at noon CT, Sep. 4, 2024, and will remain on the website for one year.
END NOTES
1 Non-GAAP measure. See Appendix: Non-GAAP Measures to this news release for more information.
2 Circana Total US MULO;13 weeks ended 7/14/2024 vs YAG.
3 SPINS Satori, Total US Natural; 12 weeks ended 7/14/2024 vs YAG.
4 Circana, Receipt Panel, Total Omnichannel; 13 weeks ended 7/14/24.
5 Internal data.